Page 1 of 1

Scenarios where contributions/deductions HAVE to be made before end of 2019?

Posted: Mon Oct 21, 2019 11:54 am
by Looking4Answers
Our income for this year, and subsequent tax returns, has a lot of moving parts. DH left his job and we were without any income for awhile. We have been under three different health insurance policies, currently under ACA, and will switch to a bronze plan at his place of employment in December. I am due to start drawing SS around the same time (low amount). We will be eligible for HSA account for the first time and plan to max it out for next year. Still debating on whether to max out this years, eligibility because of being covered in December. We might have to take advantage of the one-time withdrawal rule from an IRA in order to do that. We are in 12% bracket. DH turns 65 years old next year.

Due to the many pitfalls associated with SS, Medicare, HSA, ACA subsidies, none of which have applied to us before, I have been doing A LOT of reading (although any suggested resources would not be amiss). I have read, however, in a couple of articles that involved HSA and ACA, that contributions to IRAs in order to target income levels need to be made before end of year. However, I am not sure where I read that and think the articles may have just been poorly worded. Other references seem to indicate that IRA contributions can be made up until tax time for these purposes.

Are there any requirements in our present situation, which would involve making tax moves BEFORE end of year? I would assume the HSA catch-up provision might be one, so need to check on that. Any others?

Re: Scenarios where contributions/deductions HAVE to be made before end of 2019?

Posted: Mon Oct 21, 2019 12:02 pm
by Jack FFR1846
401k...

Re: Scenarios where contributions/deductions HAVE to be made before end of 2019?

Posted: Tue Oct 22, 2019 2:51 am
by Klewles
I think when you say "ACA subsidy," you are actually referring to the ACA Premium Tax Credit. According to 2019 Publication 4012, page H-13, you have until April 15, 2020 to make IRA and HSA contributions that will reduce your income for purposes of improving the credit for tax year 2019:
Premium Tax Credit -- Special Situations ... Consider income adjustments to reduce household income.
• If the taxpayer is eligible to claim an IRA deduction, remember that taxpayers can contribute to an IRA until the tax
filing deadline.
• If the taxpayer or spouse has an HSA and has not contributed the maximum for the tax year, he or she may
contribute to their HSA until the tax filing deadline.
You can wait until April 15 for the HSA catch-up contribution since that is part of "contributing the maximum."

Re: Scenarios where contributions/deductions HAVE to be made before end of 2019?

Posted: Tue Oct 22, 2019 4:06 am
by Tamarind
401k contributions must be made in the calendar year, as noted above.

Solo 401k accounts must be opened in the calendar year, but can be funded in the spring. Just noting this in case either of you had any 1099 income in that mix.

All contributions to IRAs and HSAs can be made in spring for the prior year. However I think Roth IRA conversions need to be made in the calendar year you want them to impact.

I think the IRA to HSA rollover is calendar year like other conversions. However for a couple of reasons I don't advise you to do this.

The main one is that performing a rollover from an IRA to an HSA will not reduce your MAGI. Unlike an HSA contribution, a rollover to HSA (qualified funding distribution) is not deductible.

The other risk is if you do not remain eligible for the HDHP for through the end of 2020, in which case you'll owe at least 10% penalty on the amount rolled over. Given the amount of job instability you've recently dealt with, you already know the best laid plans can go awry. This particular transaction is rarely worth it.