401k and Traditional IRA contributions combined to reduce MAGI for ACA?

[Firehazard]

The question is pretty much in the subject line.

Will maxing out my 401k contributions and also contributing to a traditional IRA in the same year both be considered to lower my MAGI for ACA subsidies?

I know I can contribute to both and have them fully tax deductible as my income overall is well under the income limits for doing so.  The question is, will both types of retirement contributions reduce my MAGI?  Or does having access to a 401k account preclude my IRA contributions as counting towards that MAGI reduction?

Thanks for any and all responses!

[terran]

Yes. See https://www.healthcare.gov/income-and-household-information/income/ and https://www.healthcare.gov/reporting-deductions/

[Firehazard]

Hi,
Thank you for your response.  The first link does seem to support both 401k and IRA deductions.  What has me confused is the second link.  If you scroll down the page to "What deductions should I enter?", one of the items is stated like so:

"IRA contributions (if you don’t have a retirement account through a job)"

[Paul der Krake]

Hi,
Thank you for your response.  The first link does seem to support both 401k and IRA deductions.  What has me confused is the second link.  If you scroll down the page to "What deductions should I enter?", one of the items is stated like so:

"IRA contributions (if you don’t have a retirement account through a job)"

The wording is clunky because the way they try to "help" enrollees figure out their income is clunky. Look at your paycheck! Then add this! Substract X, but only if Y!

The ACA marketplace website is trying to make things easy for people who aren't experts on taxes, but the problem is that subsidy calculations are, in fact, very complicated. So you kinda have to become an expert and then learn to read between the lines.

[terran]

That is strange. I suspect that's because anyone without a workplace retirement plan can deduct a traditional IRA contribution, but for those with a workplace plan it's income dependent, so they can't make a blanket statement.

Here it is straight from the horse's mouth (see Worksheet 1-1 on page 6): https://www.irs.gov/pub/irs-pdf/i8962.pdf

That worksheet adjusts AGI to arrive at MAGI, but none of the adjustments add back workplace retirement plans or IRA deductions, both of which reduce AGI (see schedule 1040): https://www.irs.gov/pub/irs-dft/f1040--dft.pdf, so I think it's safe to say both reduce MAGI for ACA purposes.

[MDM]

Hi,
Thank you for your response.  The first link does seem to support both 401k and IRA deductions.  What has me confused is the second link.  If you scroll down the page to "What deductions should I enter?", one of the items is stated like so:

"IRA contributions (if you don’t have a retirement account through a job)"

Your confusion is understandable.  The statement on that particular healthcare.gov page is very poorly phrased.

See What’s included as income | HealthCare.gov for a better page.

[Firehazard]

Thanks, you guys.  I feel better now!  I was going through the process of re-enrollment and came to that phrase when completing the income estimate section.  It would not have affected me for 2020, but in 2019, I have made more money than I had anticipated and will need to fund an IRA in addition to having maxed out my 401k to make the MAGI work in order to not repay any subsidy money.