This year I've been taking a mini retirement. Did a volunteer program abroad followed by some independent travel. I started in February. I've posted about this before, but it continues to be a challenge... So here we go again.
I've had no income since January when I left my job, so I applied for Medicaid. (My state expanded Medicaid). I was totally honest with the caseworkers about my situation, and after 2 months of waiting and hearing nothing, they denied me, telling me on the phone it was because I was out of the country. They were completely wrong, I later found, because I did my own legal research and for temporary absences where you intend to return, they are supposed to count you as resident. (To add insult to injury, the actual denial letter says nothing about residency… It says I was denied on the basis of income, because my last paycheck in January put me over the hump for that month. Two different reasons given.)
But I never challenged it. I probably should have, but I was too busy traveling and enjoying myself. They kicked my info back to the marketplace and I signed up for a bronze plan, paying full price.
Then I got the idea to use Roth Conversions to get my income out of the Medicaid range and just get some subsidies. It's a good time for a Roth conversion anyways.
According to IRS literature, ACA subsidies are for people with income between 100% and 400% FPL. But the practical number is often cited as 138% to 400% in Medicaid expansion states, because if you're below 138% you qualify for Medicaid.
Here's what complicates it - Medicaid eligibility is based on monthly income while ACA subsidies are based on annual income.
Imagine somebody was unemployed and on Medicaid for the first half of the year. Then they get a job for the second half. Their monthly income for those working months makes them ineligible for Medicaid, but at the end of the year they finish with annual income of only 105% FPL. I've studied the tax forms and I'm thinking they still get subsidy for the months they worked, even though they live in an expansion state.
Now, to bring that back to my situation. I have an IRA and I'm trying to figure out how much to convert. I started conversions this month and I'm literally doing them monthly instead of all at once, just to be sure I'm ineligible for Medicaid each month. (Credit to some posters on this forum for that tip.) Do I need to go all the way to 138% FPL, or is 100% enough?
To summarize:
Jan - job based coverage
Feb - Apr - no coverage, I will pay the fine for these months. (Not my fault, Medicaid's for being slow and incorrect.)
May - Dec - full priced exchange plan.
Aug - Dec - monthly Roth conversions.
I have not taken and will take no advance premium credits. I'd rather wait until filing time, I didn't want to mess anything up and have to pay them back. And also I didn't want to go through income verifications, had enough of that from Medicaid.
If I only Roth convert my income up to 100% FPL, I'll still get the tax credits when I file, even though I live in a Medicaid expansion state, correct? Does the IRS have any sort of mechanisms to say "oh, you're in Ohio so it's 138 not 100?"
