ACA subsidy cliff now going away! Yay!

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ronno2018
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ACA subsidy cliff now going away! Yay!

Post by ronno2018 »

This should really help early retirees I think.

https://jabberwocking.com/the-first-big ... ming-soon/
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Re: ACA subsidy cliff now going away! Yay!

Post by Soon2BXProgrammer »

In before the lock as it is not law yet.
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Re: ACA subsidy cliff now going away! Yay!

Post by ronno2018 »

Good point, not law yet but close!
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Re: ACA subsidy cliff now going away! Yay!

Post by NYC_Guy »

It’s gonna be signed in three days. Just repost. Sometimes the rules on this site are crazy.
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Re: ACA subsidy cliff now going away! Yay!

Post by Soon2BXProgrammer »

ronno2018 wrote: Sat Mar 06, 2021 8:56 pm Good point, not law yet but close!
Yep it has two steps.

The house will need to approve it and the president sign it.
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Re: ACA subsidy cliff now going away! Yay!

Post by ronno2018 »

I think the rule is fine. I just forgot about it.
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Re: ACA subsidy cliff now going away! Yay!

Post by LadyGeek »

This thread has run its course and is locked. Speculation about future legislation is prohibited by forum policy, see: Unacceptable Topics
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How will the new stimulus bill affect the ACA "cliff"

Post by reimann »

[Thread merged into here --admin LadyGeek]

Hi,
With the passage of the new stimulus bill I read something about how the ACA "cliff" will be done away with and the new law will allow a maximum of 8.5% of a person's income to be used for obamacare.
For example, under the present law my subsidy (for a two person couple) would be zero after I make over $72,000. At that point I would have to pay, say, BCBS about $24,000 for a policy. But with the new law I could make $100,000 but only have to pay a max of $8,500?!
Do I have this right or am I wrong? Anyone?
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Re: How will the new stimulus bill affect the ACA "cliff"

Post by Katietsu »

I would delete this question for now. Forum rules will not permit discussion until it is signed.
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Re: How will the new stimulus bill affect the ACA "cliff"

Post by MP123 »

Check back in a few days after the bill is signed. We can't discuss it until then.
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Re: How will the new stimulus bill affect the ACA "cliff"

Post by TravelGeek »

I am looking forward to visiting this or a similar thread on Friday :)
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Re: How will the new stimulus bill affect the ACA "cliff"

Post by FireAway »

Note that it's not "No more than 8.5% of your MAGI for healthcare", it's "no more than 8.5%, assuming you purchased the second-lowest cost Silver plan in your market". If you opt for a more expensive plan, you could easily pay more; if you opt for a less expensive plan you could pay less.
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Re: How will the new stimulus bill affect the ACA "cliff"

Post by oldcomputerguy »

This thread has run its course and is locked. Speculation about future legislation is prohibited by forum policy, see: Unacceptable Topics
Politics and Religion

In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
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This forum is focused on investing that is directly actionable to personal investors. We don't hold debates on conjecture.

The whole point of the policy is to (1) eliminate contentious disagreements that result from these discussions and (2) keep investors from making bad decisions. Proposed legislation changes many times between the time it's introduced and signed into law.

FYI - If anyone wants a thread unlocked after the bill gets signed into law (expected soon), please report the post using the ! in the top-right corner of the post and request the thread be unlocked.
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Re: ACA subsidy cliff now going away! Yay!

Post by LadyGeek »

The president has signed the bill into law. This thread is unlocked to continue the discussion.

This thread is now in the Personal Finance (Not Investing) forum (ACA subsidy).
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Re: ACA subsidy cliff now going away! Yay!

Post by samsoes »

LadyGeek wrote: Thu Mar 11, 2021 2:12 pm The president has signed the bill into law. This thread is unlocked to continue the discussion.

This thread is now in the Personal Finance (Not Investing) forum (ACA subsidy).
Can this one be unlocked now? viewtopic.php?f=2&t=342727
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Re: ACA subsidy cliff now going away! Yay!

Post by ClevrChico »

ronno2018 wrote: Sat Mar 06, 2021 8:53 pm This should really help early retirees I think.

https://jabberwocking.com/the-first-big ... ming-soon/
Very much so!
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Re: How will the new stimulus bill affect the ACA "cliff"

Post by LadyGeek »

The president has signed the bill into law. This thread is unlocked to continue the discussion.
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Re: How will the new stimulus bill affect the ACA "cliff"

Post by MP123 »

reimann wrote: Wed Mar 10, 2021 3:09 pm Hi,
With the passage of the new stimulus bill I read something about how the ACA "cliff" will be done away with and the new law will allow a maximum of 8.5% of a person's income to be used for obamacare.
For example, under the present law my subsidy (for a two person couple) would be zero after I make over $72,000. At that point I would have to pay, say, BCBS about $24,000 for a policy. But with the new law I could make $100,000 but only have to pay a max of $8,500?!
Do I have this right or am I wrong? Anyone?
As pointed out above your actual premium tax credit will vary based on the price of your plan and the second lowest cost Silver plan on your exchange.

But either way it's great news for those who were over the ACA cliff. The bill only eliminates the cliff for 2021 and 2022 however.

Also, note that the exchanges have reopened through May 15th. Rules vary by state but those without insurance or direct to the insurer can get an exchange plan now, in some states you may also be able to switch exchange plans during this special enrollment period. This would be very helpful for those newly eligible for subsidies (PTC).
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Re: How will the new stimulus bill affect the ACA "cliff"

Post by lazynovice »

I posted this in a separate thread before I saw this. This calculator is updated but obviously will vary based on plan selected.

https://www.kff.org/interactive/subsidy-calculator/
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Re: ACA subsidy cliff now going away! Yay!

Post by stats99 »

My read is that the cliff is removed for just 2 years.
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Re: ACA subsidy cliff now going away! Yay!

Post by MP123 »

stats99 wrote: Thu Mar 11, 2021 3:04 pm My read is that the cliff is removed for just 2 years.
Correct. Just for 2021 and 2022.

Anything more would require additional Congressional action.
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Re: ACA subsidy cliff now going away! Yay!

Post by hicabob »

I wonder if those of us with unsubsidized ACA for 2021 will get a refund?
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Re: ACA subsidy cliff now going away! Yay!

Post by furwut »

hicabob wrote: Thu Mar 11, 2021 4:32 pm I wonder if those of us with unsubsidized ACA for 2021 will get a refund?
Sure. The ACA credit is reconciled when you file your taxes.
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Re: ACA subsidy cliff now going away! Yay!

Post by marcopolo »

hicabob wrote: Thu Mar 11, 2021 4:32 pm I wonder if those of us with unsubsidized ACA for 2021 will get a refund?
I would suspect it would be sorted out on your 2021 tax return. It is just a tax credit, which you can get in advance. So, if you are eligible for it in 2021 under the new rules, then I would fully expect to be able to capture it on the 2021 tax return.

I have not seen any mention of that, but would not be surprised if people were able to update their info to start getting it in advance once the ACA website is updated.
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Re: ACA subsidy cliff now going away! Yay!

Post by hi_there »

MP123 wrote: Thu Mar 11, 2021 3:07 pm
stats99 wrote: Thu Mar 11, 2021 3:04 pm My read is that the cliff is removed for just 2 years.
Correct. Just for 2021 and 2022.

Anything more would require additional Congressional action.
But what are the chances that this is not renewed? It is much better politically for lawmakers to vote to extend benefits then to cut benefits.
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Re: ACA subsidy cliff now going away! Yay!

Post by edgeagg »

If you want to know how much you might actually save, here is a calculator from Kaiser. I found it to be useful.
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Re: ACA subsidy cliff now going away! Yay!

Post by furwut »

hi_there wrote: Thu Mar 11, 2021 4:47 pm
MP123 wrote: Thu Mar 11, 2021 3:07 pm
stats99 wrote: Thu Mar 11, 2021 3:04 pm My read is that the cliff is removed for just 2 years.
Correct. Just for 2021 and 2022.

Anything more would require additional Congressional action.
But what are the chances that this is not renewed? It is much better politically for lawmakers to vote to extend benefits then to cut benefits.
And there we can not go ...
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Re: ACA subsidy cliff now going away! Yay!

Post by furwut »

marcopolo wrote: Thu Mar 11, 2021 4:45 pm
hicabob wrote: Thu Mar 11, 2021 4:32 pm I wonder if those of us with unsubsidized ACA for 2021 will get a refund?
I would suspect it would be sorted out on your 2021 tax return. It is just a tax credit, which you can get in advance. So, if you are eligible for it in 2021 under the new rules, then I would fully expect to be able to capture it on the 2021 tax return.

I have not seen any mention of that, but would not be surprised if people were able to update their info to start getting it in advance once the ACA website is updated.
Check with your insurance marketplace. According to mine they will automatically adjust the subsidy for policies beginning April. There is also a special enrollment period so one can go in and change income, policy, etc.
Last edited by furwut on Thu Mar 11, 2021 4:59 pm, edited 1 time in total.
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Re: ACA subsidy cliff now going away! Yay!

Post by Hockey10 »

hi_there wrote: Thu Mar 11, 2021 4:47 pm
MP123 wrote: Thu Mar 11, 2021 3:07 pm
stats99 wrote: Thu Mar 11, 2021 3:04 pm My read is that the cliff is removed for just 2 years.
Correct. Just for 2021 and 2022.

Anything more would require additional Congressional action.
But what are the chances that this is not renewed? It is much better politically for lawmakers to vote to extend benefits then to cut benefits.
The new law is about 2 hours old. Speculating about what may or may not happen 2 years down the road will get this thread locked.
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Re: ACA subsidy cliff now going away! Yay!

Post by gobel »

marcopolo wrote: Thu Mar 11, 2021 4:45 pm
hicabob wrote: Thu Mar 11, 2021 4:32 pm I wonder if those of us with unsubsidized ACA for 2021 will get a refund?
I would suspect it would be sorted out on your 2021 tax return. It is just a tax credit, which you can get in advance. So, if you are eligible for it in 2021 under the new rules, then I would fully expect to be able to capture it on the 2021 tax return.

I have not seen any mention of that, but would not be surprised if people were able to update their info to start getting it in advance once the ACA website is updated.
But maybe only if you bought thru the marketplace originally? Many buy directly from a provider if they don't qualify for subsidies anyway. However, if they open enrollment now, they could immediately switch over, but I wonder how the 8.5% cap works. If it's on the annual income, then it might be useless for 2021 given that it's partway over already. If prorated monthly, then it might work.
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Re: ACA subsidy cliff now going away! Yay!

Post by LadyGeek »

Hockey10 wrote: Thu Mar 11, 2021 4:58 pm
hi_there wrote: Thu Mar 11, 2021 4:47 pm
MP123 wrote: Thu Mar 11, 2021 3:07 pm
stats99 wrote: Thu Mar 11, 2021 3:04 pm My read is that the cliff is removed for just 2 years.
Correct. Just for 2021 and 2022.

Anything more would require additional Congressional action.
But what are the chances that this is not renewed? It is much better politically for lawmakers to vote to extend benefits then to cut benefits.
The new law is about 2 hours old. Speculating about what may or may not happen 2 years down the road will get this thread locked.
I would agree.
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Re: ACA subsidy cliff now going away! Yay!

Post by Longdog »

LadyGeek wrote: Thu Mar 11, 2021 5:31 pm
Hockey10 wrote: Thu Mar 11, 2021 4:58 pm
hi_there wrote: Thu Mar 11, 2021 4:47 pm
MP123 wrote: Thu Mar 11, 2021 3:07 pm
stats99 wrote: Thu Mar 11, 2021 3:04 pm My read is that the cliff is removed for just 2 years.
Correct. Just for 2021 and 2022.

Anything more would require additional Congressional action.
But what are the chances that this is not renewed? It is much better politically for lawmakers to vote to extend benefits then to cut benefits.
The new law is about 2 hours old. Speculating about what may or may not happen 2 years down the road will get this thread locked.
I would agree.
So all discussions on this topic should be based on the premise that the ACA resorts back to its previous status starting in tax year 2022. If that’s the case, then I’d view this change as a nice two year perk, but not much more. Not quite “yay” worthy, unfortunately. Unless you’re 63.
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Re: ACA subsidy cliff now going away! Yay!

Post by iamblessed »

edgeagg wrote: Thu Mar 11, 2021 4:49 pm If you want to know how much you might actually save, here is a calculator from Kaiser. I found it to be useful.
Very helpful great.
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Re: ACA subsidy cliff now going away! Yay!

Post by HobbesMB »

I'm retiring in 3 weeks at age 53. We're going to need to rely on the ACA, and were going to have to manage around the subsidy cliff. This is a wonderful development and that is no longer a factor. I'm quite pleased, and the timing couldn't be better for my personal situation.
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Re: How will the new stimulus bill affect the ACA "cliff"

Post by iamblessed »

lazynovice wrote: Thu Mar 11, 2021 2:55 pm I posted this in a separate thread before I saw this. This calculator is updated but obviously will vary based on plan selected.

https://www.kff.org/interactive/subsidy-calculator/
This helped me a lot. Thanks
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Re: ACA subsidy cliff now going away! Yay!

Post by hi_there »

Forgive me ladygeek-sama. I have sinned.
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Re: ACA subsidy cliff now going away! Yay!

Post by MP123 »

gobel wrote: Thu Mar 11, 2021 5:23 pm
marcopolo wrote: Thu Mar 11, 2021 4:45 pm
hicabob wrote: Thu Mar 11, 2021 4:32 pm I wonder if those of us with unsubsidized ACA for 2021 will get a refund?
I would suspect it would be sorted out on your 2021 tax return. It is just a tax credit, which you can get in advance. So, if you are eligible for it in 2021 under the new rules, then I would fully expect to be able to capture it on the 2021 tax return.

I have not seen any mention of that, but would not be surprised if people were able to update their info to start getting it in advance once the ACA website is updated.
But maybe only if you bought thru the marketplace originally? Many buy directly from a provider if they don't qualify for subsidies anyway. However, if they open enrollment now, they could immediately switch over, but I wonder how the 8.5% cap works. If it's on the annual income, then it might be useless for 2021 given that it's partway over already. If prorated monthly, then it might work.
Premium tax credits can be calculated monthly, but only apply to policies bought through the healthcare exchange.

So, people that have a policy directly with an insurer might want to switch to an exchange policy ASAP if their income is in a range where they'd now qualify. Some incomes might be so high that the expected 8.5% contribution would exceed the cost of the second lowest cost Silver plan (so no PTC), so it might not be worth switching in those cases.
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Re: ACA subsidy cliff now going away! Yay!

Post by iamblessed »

edgeagg wrote: Thu Mar 11, 2021 4:49 pm If you want to know how much you might actually save, here is a calculator from Kaiser. I found it to be useful.
So nice to go over 400% FPL and not get killed.
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Re: ACA subsidy cliff now going away! Yay!

Post by cyclist »

For us, going up to the top of the 12% bracket seems to be a better strategy than the cliff-inspired limit we’d previously had. (At least until I start Medicare next year!)

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Re: ACA subsidy cliff now going away! Yay!

Post by MP123 »

cyclist wrote: Thu Mar 11, 2021 7:31 pm For us, going up to the top of the 12% bracket seems to be a better strategy than the cliff-inspired limit we’d previously had. (At least until I start Medicare next year!)

Cyclist
But isn't the 12% bracket really the 20.5% bracket now for those getting PTC?

Factoring in the continuing reduction in PTC even over the old "cliff" seems to add a new twist to Roth conversion decisions. But at least you don't have to worry about the cliff itself.
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Re: ACA subsidy cliff now going away! Yay!

Post by edgeagg »

MP123 wrote: Thu Mar 11, 2021 7:58 pm
But isn't the 12% bracket really the 20.5% bracket now for those getting PTC?

Factoring in the continuing reduction in PTC even over the old "cliff" seems to add a new twist to Roth conversion decisions. But at least you don't have to worry about the cliff itself.
I am dense, but what is PTC? And how does this new policy twist roth contributions?
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Re: ACA subsidy cliff now going away! Yay!

Post by marcopolo »

MP123 wrote: Thu Mar 11, 2021 7:58 pm
cyclist wrote: Thu Mar 11, 2021 7:31 pm For us, going up to the top of the 12% bracket seems to be a better strategy than the cliff-inspired limit we’d previously had. (At least until I start Medicare next year!)

Cyclist
But isn't the 12% bracket really the 20.5% bracket now for those getting PTC?

Factoring in the continuing reduction in PTC even over the old "cliff" seems to add a new twist to Roth conversion decisions. But at least you don't have to worry about the cliff itself.
It is at least the 20.5%. It gets a little more complicated as MAGI increases under what used to be the cliff.
Once you are over the old cliff, the loss of tax credits is a constant 8.5%.

But below that, the expected contribution drops down to 6%, 4%, 2%, and 0%, for MAGI at 300%, 250%, 200%, and 150%, respectively. And these are little mini-cliffs, in that a single dollar crossing over put ALL of your MAGI into play at the higher rate. So, the loss of tax credits is even larger, and has step functions.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: ACA subsidy cliff now going away! Yay!

Post by marcopolo »

edgeagg wrote: Thu Mar 11, 2021 8:07 pm
MP123 wrote: Thu Mar 11, 2021 7:58 pm
But isn't the 12% bracket really the 20.5% bracket now for those getting PTC?

Factoring in the continuing reduction in PTC even over the old "cliff" seems to add a new twist to Roth conversion decisions. But at least you don't have to worry about the cliff itself.
I am dense, but what is PTC? And how does this new policy twist roth contributions?
What is commonly referred to as the ACA subsidy, is actually called a "Premium Tax Credit" (PTC) , or more accurately, the "Premium Assistance Tax Credit" (PATC). When you do Roth Conversions, they increase your Modified Adjusted Gross Income (MAGI). The amount of PATC is based on the MAGI.
So, when you do Roth Conversion, you not only pay the income tax (say at 12% rate), but you also lose some of the PATC (used to be ~10%, but now ~8.5%), so the effective cost of the Roth Conversion is higher than if the PATC is not an issue for someone. The recent change is in the rates, and limits of the PATC.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: ACA subsidy cliff now going away! Yay!

Post by edgeagg »

marcopolo wrote: Thu Mar 11, 2021 8:16 pm
edgeagg wrote: Thu Mar 11, 2021 8:07 pm
What is commonly referred to as the ACA subsidy, is actually called a "Premium Tax Credit" (PTC) , or more accurately, the "Premium Assistance Tax Credit" (PATC). When you do Roth Conversions, they increase your Modified Adjusted Gross Income (MAGI). The amount of PATC is based on the MAGI.
So, when you do Roth Conversion, you not only pay the income tax (say at 12% rate), but you also lose some of the PATC (used to be ~10%, but now ~8.5%), so the effective cost of the Roth Conversion is higher than if the PATC is not an issue for someone. The recent change is in the rates, and limits of the PATC.
[ quote fixed by admin LadyGeek]

Thanks! Well explained.
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Re: ACA subsidy cliff now going away! Yay!

Post by cowdogman »

marcopolo wrote: Thu Mar 11, 2021 8:11 pm But below that, the expected contribution drops down to 6%, 4%, 2%, and 0%, for MAGI at 300%, 250%, 200%, and 150%, respectively. And these are little mini-cliffs, in that a single dollar crossing over put ALL of your MAGI into play at the higher rate. So, the loss of tax credits is even larger, and has step functions.
Not sure that is right. The new table in the ARPA is the same structure as under the prior law. In the past the Treasury Department created the FPL chart with which we are all familiar by interpolating within each range. I strongly suspect that it will be the same with the new table. I just haven't traced it thru the legislation. See page 3 of Rev. Proc. 2019-29 for the 2020 table--https://www.irs.gov/pub/irs-drop/rp-19-29.pdf.

I loved the cliff so much I would really like to see a bunch of mini-cliffs, but alas I don't think that will be the case. :happy
Last edited by cowdogman on Thu Mar 11, 2021 9:24 pm, edited 2 times in total.
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ronno2018
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Re: ACA subsidy cliff now going away! Yay!

Post by ronno2018 »

Go Curry Cracker has a nice analysis at https://www.gocurrycracker.com/american ... t-of-2021/
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Re: ACA subsidy cliff now going away! Yay!

Post by marcopolo »

cowdogman wrote: Thu Mar 11, 2021 8:44 pm
marcopolo wrote: Thu Mar 11, 2021 8:11 pm But below that, the expected contribution drops down to 6%, 4%, 2%, and 0%, for MAGI at 300%, 250%, 200%, and 150%, respectively. And these are little mini-cliffs, in that a single dollar crossing over put ALL of your MAGI into play at the higher rate. So, the loss of tax credits is even larger, and has step functions.
Not sure that is right. The new table in the ARPA is the same structure as under the prior law. In the past the Treasury Department created the FPL chart with which we are all familiar by interpolating within each range. I strongly suspect that it will be the same with the new table. I just haven't traced it thru the legislation. See page 3 of Rev. Proc. 2019-29 for the 2020 table--https://www.irs.gov/pub/irs-drop/rp-19-29.pdf.

I loved the cliff so much I would really like to see a bunch of mini-cliffs, but alas I don't think that will be the case. :happy
I think you are right that the percentage is interpolated within the range. My mistake.

But, does it work like a marginal rate? I think for a given MAGI, all the MAGI is assessed at the marginal rate. So, it works differently than typical marginal tax rates.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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FOGU
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Re: ACA subsidy cliff now going away! Yay!

Post by FOGU »

marcopolo wrote: Thu Mar 11, 2021 8:16 pm
edgeagg wrote: Thu Mar 11, 2021 8:07 pm
MP123 wrote: Thu Mar 11, 2021 7:58 pm
But isn't the 12% bracket really the 20.5% bracket now for those getting PTC?

Factoring in the continuing reduction in PTC even over the old "cliff" seems to add a new twist to Roth conversion decisions. But at least you don't have to worry about the cliff itself.
I am dense, but what is PTC? And how does this new policy twist roth contributions?
What is commonly referred to as the ACA subsidy, is actually called a "Premium Tax Credit" (PTC) , or more accurately, the "Premium Assistance Tax Credit" (PATC). When you do Roth Conversions, they increase your Modified Adjusted Gross Income (MAGI). The amount of PATC is based on the MAGI.
So, when you do Roth Conversion, you not only pay the income tax (say at 12% rate), but you also lose some of the PATC (used to be ~10%, but now ~8.5%), so the effective cost of the Roth Conversion is higher than if the PATC is not an issue for someone. The recent change is in the rates, and limits of the PATC.
Thank you for this explanation. So in the Kaiser Family Foundation calculator cited above, is it MAGI that should be submitted in the "yearly household income" field?
dcop
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Re: How will the new stimulus bill affect the ACA "cliff"

Post by dcop »

This thread is the first I've hear about the ACA subsidies in the stimulus. So to keep my question simple can we expect the marketplace to adjust our premiums next month?
marcopolo
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Re: ACA subsidy cliff now going away! Yay!

Post by marcopolo »

FOGU wrote: Thu Mar 11, 2021 9:44 pm
marcopolo wrote: Thu Mar 11, 2021 8:16 pm
edgeagg wrote: Thu Mar 11, 2021 8:07 pm
MP123 wrote: Thu Mar 11, 2021 7:58 pm
But isn't the 12% bracket really the 20.5% bracket now for those getting PTC?

Factoring in the continuing reduction in PTC even over the old "cliff" seems to add a new twist to Roth conversion decisions. But at least you don't have to worry about the cliff itself.
I am dense, but what is PTC? And how does this new policy twist roth contributions?
What is commonly referred to as the ACA subsidy, is actually called a "Premium Tax Credit" (PTC) , or more accurately, the "Premium Assistance Tax Credit" (PATC). When you do Roth Conversions, they increase your Modified Adjusted Gross Income (MAGI). The amount of PATC is based on the MAGI.
So, when you do Roth Conversion, you not only pay the income tax (say at 12% rate), but you also lose some of the PATC (used to be ~10%, but now ~8.5%), so the effective cost of the Roth Conversion is higher than if the PATC is not an issue for someone. The recent change is in the rates, and limits of the PATC.
Thank you for this explanation. So in the Kaiser Family Foundation calculator cited above, is it MAGI that should be submitted in the "yearly household income" field?
I believe that is what the calculator uses.
Once in a while you get shown the light, in the strangest of places if you look at it right.
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