Author Topic: ACA cliff help  (Read 1126 times)

jamaicaspanish

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ACA cliff help
« on: August 30, 2018, 03:53:18 PM »
I have  first-world problem with income.
DW and I are headed over the ACA cliff, I think.

DB pension + Dividends are just over the ACA subsidy level.
Our yearly spending is well under the income limit.
(I have a side gig -- sorry retirement police -- and contribute all of those earnings to an individual 401k).

Last year(2017) , our state offered an HSA-qualified marketplace plan.  So we fully funded an HSA and had no problem staying under the income limit.

This year (2018), there are zero HSA-qualified marketplace plans in our state. So it looks like our earned income will be over the limit.

Our subsidy is $700 a month.  Having too much income will cost us $8400 in lost subsidies.

I have tried researching ways to tax-defer income (pension and/or dividends), but my Google Fu skills have failed me.

I called my State pension provider and asked for a temporarily reduced payout. 
Or temporarily stopping my payout. 
No can do.

Any experts with recommendations?
Thanks in advance.

nalor511

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Re: ACA cliff help
« Reply #1 on: August 30, 2018, 04:37:47 PM »
Reading your post, this seems like the sort of thing that would have come up in Q4 2017 when you enrolled for 2018, and modeled out your taxes/ACA stuff for the 2018 year. I know it did for me. That said, at this point, your only real option for getting subsidies back (assuming that's what you're going for) is to reduce MAGI back under the subsidy cliff. You could have a capital loss on paper (tax-loss-harvesting), gambling loss, or any other type of tax deductible donation/contribution that comes off MAGI. TLH isn't too terribly hard, you could invest a sum in 2 things that don't typically go up at the same time, and when one of them goes down, you harvest the amount you need. How much do you need?

jim555

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Re: ACA cliff help
« Reply #2 on: September 01, 2018, 11:13:06 PM »
Reduce your income by going to lower dividend growth or small cap stocks. 

radram

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Re: ACA cliff help
« Reply #3 on: September 02, 2018, 01:37:49 AM »
Reduce your income by going to lower dividend growth or small cap stocks.

Wouldn't this require selling existing stocks or funds? Wouldn't that cause a capital gain, making the matter even worse for 2018? It might make things better for 2019 though.

Do you have any investments that could be sold for a loss?

What about your side hustle? Any chance it could take a paper loss this year? 

How far over the cliff will you be?

Anon in Alaska

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Re: ACA cliff help
« Reply #4 on: September 02, 2018, 02:30:53 AM »
Start a small business that will lose money the first year. The good (?) news is that is most of them.

terran

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Re: ACA cliff help
« Reply #5 on: September 02, 2018, 06:31:28 AM »
The only thing I can think of is to donate appreciated shares to charity (or a donor advised fund) to lower income by itemizing (will have to be more than your standard deduction) with the side benefit of fewer shares contributing to your dividend problem. Maybe try to find a charity that tries to bring about better health insurance options.

jim555

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Re: ACA cliff help
« Reply #6 on: September 02, 2018, 07:07:17 AM »
Wouldn't this require selling existing stocks or funds? Wouldn't that cause a capital gain, making the matter even worse for 2018? It might make things better for 2019 though.
True, repositioning might hurt this year but help in future years.

Paul der Krake

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Re: ACA cliff help
« Reply #7 on: September 02, 2018, 08:31:26 AM »
Can you post some numbers including family size, age, income breakdown, and location? I don't understand how you can go from a $700/month subsidy to no subsidy with just the amount you're not able to put in the HSA anymore.

jamaicaspanish

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Re: ACA cliff help
« Reply #8 on: September 02, 2018, 08:59:15 AM »
Thanks for the input.
A few more details:

Side gig is online tutoring (I specialize in Spanish for adults). 
I did buy a chromebook last year. And a set of bluetooth headphones.  So . . . expenses of three hundred bucks.  Not much way to show a loss.

As far as I can tell, the ACA subsidies are all or nothing for us.   
If we show income of less than ~65k, we receive the full subsidy.
If we show income of 65k + 1 . . . we yodel ourselves off the edge.
So an HSA contribution of 6.7k provides some breathing room.

We have a basic three-fund Vanguard allocation, so no fancy financial moves there.
I will look into TLH.

We could move to a state that offers a marketplace plan with an HSA.  But the states we´re interested in will tax our Missouri state pension + charge more for the marketplace plan.

Moving overseas and avoiding the healthcare quagmire in the States is an option . . . but we would like to have the option of staying, as well.

Thanks again for all the feedback.


seattlecyclone

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Re: ACA cliff help
« Reply #9 on: September 02, 2018, 09:36:14 AM »
The only thing I can think of is to donate appreciated shares to charity (or a donor advised fund) to lower income by itemizing (will have to be more than your standard deduction) with the side benefit of fewer shares contributing to your dividend problem. Maybe try to find a charity that tries to bring about better health insurance options.

The charitable deduction doesn't actually help with the ACA MAGI. That is computed prior to the application of the standard or itemized deductions. You're right that foregoing the dividends on the donated shares for the rest of the year will help, but you'd have to make a pretty huge donation for this to make a dent in your problem this year.

DavidAnnArbor

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Re: ACA cliff help
« Reply #10 on: September 02, 2018, 10:25:44 AM »
So the income you have does not include any earned income that could go into a traditional IRA ?

terran

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Re: ACA cliff help
« Reply #11 on: September 02, 2018, 10:30:56 AM »
The only thing I can think of is to donate appreciated shares to charity (or a donor advised fund) to lower income by itemizing (will have to be more than your standard deduction) with the side benefit of fewer shares contributing to your dividend problem. Maybe try to find a charity that tries to bring about better health insurance options.

The charitable deduction doesn't actually help with the ACA MAGI. That is computed prior to the application of the standard or itemized deductions. You're right that foregoing the dividends on the donated shares for the rest of the year will help, but you'd have to make a pretty huge donation for this to make a dent in your problem this year.

bummer... didn't know that.

Another thought if you're JUST over the cliff (as in you'd essentially like to lose some moeny): I can't remember if it was here or on Bogleheads, but there's a discussion going on about creating an investing loss by buying or selling options that will either pay out to cover the cost of going over the some cliff or create a loss big enough not to go over the cliff. I'll post it if I can find.

DavidAnnArbor

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Re: ACA cliff help
« Reply #12 on: September 02, 2018, 10:33:19 AM »
The only thing I can think of is to donate appreciated shares to charity (or a donor advised fund) to lower income by itemizing (will have to be more than your standard deduction) with the side benefit of fewer shares contributing to your dividend problem. Maybe try to find a charity that tries to bring about better health insurance options.

The charitable deduction doesn't actually help with the ACA MAGI. That is computed prior to the application of the standard or itemized deductions. You're right that foregoing the dividends on the donated shares for the rest of the year will help, but you'd have to make a pretty huge donation for this to make a dent in your problem this year.



bummer... didn't know that.

Another thought if you're JUST over the cliff (as in you'd essentially like to lose some moeny): I can't remember if it was here or on Bogleheads, but there's a discussion going on about creating an investing loss by buying or selling options that will either pay out to cover the cost of going over the some cliff or create a loss big enough not to go over the cliff. I'll post it if I can find.

If you have a capital loss I think there is a maximum of $3,000 that can offset ordinary income in a given year if you've exhausted offsetting capital gains.

radram

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Re: ACA cliff help
« Reply #13 on: September 03, 2018, 07:35:46 AM »
If you have a capital loss I think there is a maximum of $3,000 that can offset ordinary income in a given year if you've exhausted offsetting capital gains.

I am not an accountant, but I also believe this is true. If the amount of loss is greater, you can carry it over to subsequent years. That doesn't really help for this year though.

MustacheAndaHalf

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Re: ACA cliff help
« Reply #14 on: September 05, 2018, 12:05:38 PM »
If you're using "specific identification" method at Vanguard, you can sell individual lots.  Might be worth checking your "cost basis" area for international holdings - they've been struggling at various times this year.  There might be some tax loss harvesting available there.

Can you contribute to a Traditional IRA with your side gig "earned income"?  You can contribute up to the amount of your income, max $5,500.  And if your side gig exceeds that, you might be able to setup a Traditional IRA for your wife.  That would take all of your side gig income and contribute it, pre-tax, into IRAs.

The advice on this other website is to hire an accountant to take a closer look.
https://www.healthinsurance.org/faqs/with-my-income-im-barely-over-the-eligibility-limit-for-a-premium-subsidy-is-there-anything-i-can-do-to-lower-my-income-so-i-become-eligible/

Acastus

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Re: ACA cliff help
« Reply #15 on: October 02, 2018, 09:11:29 PM »
The only thing I can think of is to donate appreciated shares to charity (or a donor advised fund) to lower income by itemizing (will have to be more than your standard deduction) with the side benefit of fewer shares contributing to your dividend problem. Maybe try to find a charity that tries to bring about better health insurance options.

This will reduce taxable income (page 2), but it has no effect on AGI (page 1). ACA subsidies are based on AGI.