How to qualify wife for ACA subsidy in 2018

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RetiredInTN2017
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How to qualify wife for ACA subsidy in 2018

Post by RetiredInTN2017 » Sun Feb 18, 2018 9:41 am

I will be 69 this month and wife is 60. My projected income for 2018 with SS, company pensions, dividends and rent income will be approximately $68K+. Will not take a RMD from my IRA until 2019. If I could keep my income below $66K for 2018 wife qualifies for $977 per month goverment health care, ACA subsidy or $11,724 annually in health insurance premiums.

My question: Can I suspend my SS benefits ($2,833 monthly) for the last 3 months of 2018 and thus reducing my annual income below $66K, qualifying for the full subsidy?

In 2109 when 70 1/2 I will have to take my RMD then our annual income will be over $99K and so I will not be able to take the health care subsidy for her. Unless someone has other ideas.

Flora
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Re: How to qualify wife for ACA subsidy in 2018

Post by Flora » Sun Feb 18, 2018 9:51 am

Consider charging less rent by 2k in order to save almost 12k with the subsidy, thereby netting 10k.

DSInvestor
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Re: How to qualify wife for ACA subsidy in 2018

Post by DSInvestor » Sun Feb 18, 2018 10:09 am

Do you have any tax lots with capital losses in your taxable account? Realizing those tax losses could reduce your AGI by up to 3K/yr. For example, you realize 15K of capital loss in 2018. This would reduce your AGI by 3K in 2018 and 12K of loss will carry forward to tax year 2019. 15K of net capital loss could give you 5 years of 3K/yr reductions in your AGI.

If she signs up for a health insurance plan that is HSA eligible, the HSA contributions for her would reduce your AGI. 2018 HSA contribution limit is $4450 for those age 55 and over.
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bberris
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Re: How to qualify wife for ACA subsidy in 2018

Post by bberris » Sun Feb 18, 2018 10:30 am

RetiredInTN2017 wrote:
Sun Feb 18, 2018 9:41 am
I will be 69 this month and wife is 60. My projected income for 2018 with SS, company pensions, dividends and rent income will be approximately $68K+. Will not take a RMD from my IRA until 2019. If I could keep my income below $66K for 2018 wife qualifies for $977 per month goverment health care, ACA subsidy or $11,724 annually in health insurance premiums.

My question: Can I suspend my SS benefits ($2,833 monthly) for the last 3 months of 2018 and thus reducing my annual income below $66K, qualifying for the full subsidy?

In 2109 when 70 1/2 I will have to take my RMD then our annual income will be over $99K and so I will not be able to take the health care subsidy for her. Unless someone has other ideas.
HSA and IRA both reduce ACA income. Move investments to non-dividend payers, if you can do that without capital gains.

pshonore
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Re: How to qualify wife for ACA subsidy in 2018

Post by pshonore » Sun Feb 18, 2018 11:10 am

bberris wrote:
Sun Feb 18, 2018 10:30 am
RetiredInTN2017 wrote:
Sun Feb 18, 2018 9:41 am
I will be 69 this month and wife is 60. My projected income for 2018 with SS, company pensions, dividends and rent income will be approximately $68K+. Will not take a RMD from my IRA until 2019. If I could keep my income below $66K for 2018 wife qualifies for $977 per month goverment health care, ACA subsidy or $11,724 annually in health insurance premiums.

My question: Can I suspend my SS benefits ($2,833 monthly) for the last 3 months of 2018 and thus reducing my annual income below $66K, qualifying for the full subsidy?

In 2109 when 70 1/2 I will have to take my RMD then our annual income will be over $99K and so I will not be able to take the health care subsidy for her. Unless someone has other ideas.
HSA and IRA both reduce ACA income. Move investments to non-dividend payers, if you can do that without capital gains.
You can delay your 2019 RMD (or any part of it) until April 2020 to keep your 2019 income down as well. Of course you'll have take 2 RMDs in 2020 if you take that route. I believe suspending SS is still allowed once you're FRA and will give a slight bump in benefits (2% for 3 months) once you resume

DSInvestor
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Re: How to qualify wife for ACA subsidy in 2018

Post by DSInvestor » Sun Feb 18, 2018 11:21 am

RetiredInTN2017 wrote:
Sun Feb 18, 2018 9:41 am
I will be 69 this month and wife is 60. My projected income for 2018 with SS, company pensions, dividends and rent income will be approximately $68K+. Will not take a RMD from my IRA until 2019. If I could keep my income below $66K for 2018 wife qualifies for $977 per month goverment health care, ACA subsidy or $11,724 annually in health insurance premiums.
Is 68K your projected total income or your projected AGI (Adjusted Gross Income)? If total income (i.e. sum of all your income) is 68K, your AGI would be lower because not all of the social security benefit will be included in AGI and your current situation may already allow for ACA subsidy.

If you do a dry run in tax software to enter your income, check the 1040 form to see how much social security is included in the AGI. Social security appears on lines 20a and 20b of the 1040 form. line 20a should be your social security benefit. line 20b is the taxable amount that is included in AGI.

Link to page showing MAGI for ACA purposes: http://laborcenter.berkeley.edu/pdf/201 ... mary13.pdf

edit: While AGI does not include non-taxable amount of social security, the MAGI for ACA purposes adds it back.
Last edited by DSInvestor on Mon Feb 19, 2018 12:37 pm, edited 1 time in total.
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jeff1949
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Re: How to qualify wife for ACA subsidy in 2018

Post by jeff1949 » Sun Feb 18, 2018 1:33 pm

The financial "cliff" for the ACA for my wife and I is $64,960 so you might want to check that $66k figure. One dollar over the limit and the subsidy vanishes of course.

Wagnerjb
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Re: How to qualify wife for ACA subsidy in 2018

Post by Wagnerjb » Sun Feb 18, 2018 2:21 pm

Flora wrote:
Sun Feb 18, 2018 9:51 am
Consider charging less rent by 2k in order to save almost 12k with the subsidy, thereby netting 10k.
How about just asking your tenant to delay the rent payments for the last month or two of 2018 (as many as necessary), paying you the back rent in January 2019.

Best wishes.
Andy

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MP123
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Re: How to qualify wife for ACA subsidy in 2018

Post by MP123 » Sun Feb 18, 2018 2:44 pm

Be sure you know exactly where the "cliff" is. You don't want to go over even by $1.

Also, shifting income to 2019 will likely just make it harder to qualify then although it sounds like your RMDs will do that anyway? You also may need to refund any premium credits you received if you go over the cliff so it isn't good enough to just show a qualifying income to get in.

Has she already signed up on the exchange for your state? Open enrollment was in November.

rob65
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Re: How to qualify wife for ACA subsidy in 2018

Post by rob65 » Sun Feb 18, 2018 2:57 pm

Make sure you are correctly computing the MAGI for ACA:

https://www.healthcare.gov/glossary/mod ... come-magi/

MAGI includes non-taxable Social Security and tax exempt interest.

rob65
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Re: How to qualify wife for ACA subsidy in 2018

Post by rob65 » Sun Feb 18, 2018 3:01 pm

DSInvestor wrote:
Sun Feb 18, 2018 11:21 am
RetiredInTN2017 wrote:
Sun Feb 18, 2018 9:41 am
I will be 69 this month and wife is 60. My projected income for 2018 with SS, company pensions, dividends and rent income will be approximately $68K+. Will not take a RMD from my IRA until 2019. If I could keep my income below $66K for 2018 wife qualifies for $977 per month goverment health care, ACA subsidy or $11,724 annually in health insurance premiums.
Is 68K your projected total income or your projected AGI (Adjusted Gross Income)? If total income (i.e. sum of all your income) is 68K, your AGI would be lower because not all of the social security benefit will be included in AGI and your current situation may already allow for ACA subsidy.

If you do a dry run in tax software to enter your income, check the 1040 form to see how much social security is included in the AGI. Social security appears on lines 20a and 20b of the 1040 form. line 20a should be your social security benefit. line 20b is the taxable amount that is included in AGI.

Link to page showing MAGI for ACA purposes: http://laborcenter.berkeley.edu/pdf/201 ... mary13.pdf
Further down in the link, you have to add back the difference between lines 20a and 20b to get the ACA MAGI.

DetroitRick
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Re: How to qualify wife for ACA subsidy in 2018

Post by DetroitRick » Sun Feb 18, 2018 3:39 pm

The cliff you are trying to avoid (at 400% of federal poverty level where subsidies go away), is a bit less than you mentioned. For 2018 ACA, it's based on 2017 federal poverty level, which is $16,240 for a family of 2 in the lower 48 states (so x 400% is $64,960). For 2019 ACA, it's based on 2018 federal poverty level, which is $16,460 (so x 4 = $65,840. So I think your actual target is very slightly less than the $66k you mentioned (for ACA coverage this year).

Other than suspending social security for 3 months, other ideas:
Lower rent a bit (subsidy benefit would outweigh) or pull forward related expenses
See if there is an opportunity to harvest a loss in your taxable investments (up to the net limitation of $3k)
If either of you has ANY earned income (although you didn't mention it), contribute to a traditional IRA to the extent allowed (lower of max contribution or your earned income).
Do some combination of the above to keep income under $64,960.

I do believe you can suspend social security up until age 70, but have no idea as to the administrative hassle. As others have mentioned, all of social security is included in your modified adjusted gross income (which is what ACA uses). Regardless of how much is taxable. Besides SS, there are 2 other potential adjustments to AGI, as the link posted upthread mentions (i.e., tax-exempt interest and foreign earned income/housing). As you know, being pennies off at year-end can be very expensive if it takes you over that 400% threshold (think end of year gain distributions, special dividends and interest). The closer you shave to that MAGI number, the closer you need to late-in-year earnings. But the benefits are pretty high, of course.

Best of luck.

RetiredInTN2017
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Re: How to qualify wife for ACA subsidy in 2018

Post by RetiredInTN2017 » Mon Feb 19, 2018 7:46 am

DSInvestor wrote:
Sun Feb 18, 2018 10:09 am
Do you have any tax lots with capital losses in your taxable account? Realizing those tax losses could reduce your AGI by up to 3K/yr. For example, you realize 15K of capital loss in 2018. This would reduce your AGI by 3K in 2018 and 12K of loss will carry forward to tax year 2019. 15K of net capital loss could give you 5 years of 3K/yr reductions in your AGI.

If she signs up for a health insurance plan that is HSA eligible, the HSA contributions for her would reduce your AGI. 2018 HSA contribution limit is $4450 for those age 55 and over.
No losses in the taxable account. I signed he for the ACA back in November. I will check out the HSA contribution.

RetiredInTN2017
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Re: How to qualify wife for ACA subsidy in 2018

Post by RetiredInTN2017 » Mon Feb 19, 2018 7:48 am

bberris wrote:
Sun Feb 18, 2018 10:30 am
RetiredInTN2017 wrote:
Sun Feb 18, 2018 9:41 am
I will be 69 this month and wife is 60. My projected income for 2018 with SS, company pensions, dividends and rent income will be approximately $68K+. Will not take a RMD from my IRA until 2019. If I could keep my income below $66K for 2018 wife qualifies for $977 per month goverment health care, ACA subsidy or $11,724 annually in health insurance premiums.

My question: Can I suspend my SS benefits ($2,833 monthly) for the last 3 months of 2018 and thus reducing my annual income below $66K, qualifying for the full subsidy?

In 2109 when 70 1/2 I will have to take my RMD then our annual income will be over $99K and so I will not be able to take the health care subsidy for her. Unless someone has other ideas.
HSA and IRA both reduce ACA income. Move investments to non-dividend payers, if you can do that without capital gains.

Everything in the taxable account if sold would cause capital gains.

RetiredInTN2017
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Joined: Sat Dec 30, 2017 9:36 am

Re: How to qualify wife for ACA subsidy in 2018

Post by RetiredInTN2017 » Mon Feb 19, 2018 7:55 am

DSInvestor wrote:
Sun Feb 18, 2018 11:21 am
RetiredInTN2017 wrote:
Sun Feb 18, 2018 9:41 am
I will be 69 this month and wife is 60. My projected income for 2018 with SS, company pensions, dividends and rent income will be approximately $68K+. Will not take a RMD from my IRA until 2019. If I could keep my income below $66K for 2018 wife qualifies for $977 per month goverment health care, ACA subsidy or $11,724 annually in health insurance premiums.
Is 68K your projected total income or your projected AGI (Adjusted Gross Income)? If total income (i.e. sum of all your income) is 68K, your AGI would be lower because not all of the social security benefit will be included in AGI and your current situation may already allow for ACA subsidy.

If you do a dry run in tax software to enter your income, check the 1040 form to see how much social security is included in the AGI. Social security appears on lines 20a and 20b of the 1040 form. line 20a should be your social security benefit. line 20b is the taxable amount that is included in AGI.

Link to page showing MAGI for ACA purposes: http://laborcenter.berkeley.edu/pdf/201 ... mary13.pdf

[They use MAGI and not AGI.]

SuzBanyan
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Re: How to qualify wife for ACA subsidy in 2018

Post by SuzBanyan » Mon Feb 19, 2018 10:25 am

Although lumping rental income into 2019 has been discussed, I would think that lumping expenses, such as property taxes into 2018, might be easier.

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Watty
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Re: How to qualify wife for ACA subsidy in 2018

Post by Watty » Mon Feb 19, 2018 10:40 am

RetiredInTN2017 wrote:
Sun Feb 18, 2018 9:41 am
If I could keep my income below $66K for 2018 wife qualifies for $977 per month goverment health care, ACA subsidy or $11,724 annually in health insurance premiums.
It would be good to double check your numbers, The details are different but I am in a somewhat similar situation and at that level you still need to pay about 9.5% of your income towards the health insurance premium which is in the ballpark of $500 a month. The $977 a month is about what the second highest silver plan costs in my area so I get a the subsidy is about $500 a month. If she getting a $977 subsidy that implies that the second highest (edit: lowest) silver plan in your area is about $1,500 which I guess is possible but that is a lot higher than in my area.

The rules for suspending Social Security have been changed several time so it would be beat to call them up and ask.

One other option would be to sell the rental property if that would not generate a lot of capital gains.
Last edited by Watty on Mon Feb 19, 2018 9:52 pm, edited 1 time in total.

RetiredInTN2017
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Re: How to qualify wife for ACA subsidy in 2018

Post by RetiredInTN2017 » Mon Feb 19, 2018 5:35 pm

Yes, we signed her up for the 2nd highest plan, BCBS of TN. I do not remember the exact price for the higher plan. I will take your advice on calling SSA on the suspending SS. The rental property was a shared investment and she likes the monthly cash flow and does not want to sell. But you know who the renters call if there is a problem...

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Watty
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Re: How to qualify wife for ACA subsidy in 2018

Post by Watty » Mon Feb 19, 2018 9:53 pm

I edited my post, it should have said second lowest, not second highest.

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