The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Holyoak on March 23, 2019, 07:59:54 AM
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So to best maximize my subsidy-to-income ratio, can you refuse simple bank interest, or even refund/pay some or all of it back so as to stay below the ACA subsidy income threshold? I am currently taking a lot of funds from a Marcus savings account (paying 2.25%), and placing them in a near zero interest local account to achieve this goal, but it is a rather blunt tool, when other not set in stone variable are accounted for.
I'd be real nice to see you were/are getting real close to crossing a certain no ACA subsity for you threshold, refuse/refund say $1000/whatever to keep you in the subsidy zone, and know you got as close as possible w/o going over... Go over the max ACA income limits by $.01, means I go from owing at most $1275, to $4500! Hate missing out on sweet interest, but get too cute, and you pay VERY dearly.
I know I can simply transfer the $$$ back into the Marcus account near the end of the year if it seems I will not go over income thresholds; just the same I'd be interested in learning if I can achieve my initial question, and get really, really close with a high level of confidence. I know to most non MMM type folks, wanting to refund/refuse great interest/placing $$$ into basically zero interest savings accounts to save money seems crazy... Guess they never dealt with the ACA, or its subsidy limits in ER. Thanks.
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So to best maximize my subsidy-to-income ratio, can you refuse simple bank interest, or even refund/pay some or all of it back so as to stay below the ACA subsidy income threshold?
No. Once it is paid to you, it will be added to the amount reported on the 1099-INT form you (and the IRS) receive from the bank.
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You can't refuse to be paid interest. You can't pay it back and undo the tax effects.
You can, as you are doing, move money out of an interest-bearing account to avoid being paid interest, which will avoid increasing your ACA MAGI and therefore help keep you under the subsidy cliff.
There are other ways to reduce MAGI - contributing to an HSA and realizing capital losses are two common ones, although there are others. If you are still working, then contributing to a traditional IRA or 401(k) would also work. These may or may not apply to you.
The ACA MAGI cliff for someone in the continental US this year for a single with no dependents is $48,560 for 2019.
I try to do my taxes for the year in December and make any adjustments then to get my AGI where I want it to be. It's extra work, but usually you can get a pretty good idea of where you stand.
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Thank you both.
I figured as much... Damn. I am not working, and if so would be doing the 401(K)/traditional IRA dance to suit the situation. I did see the slight ACA MAGI increase for singles in 19, and seems I will have to as best I can, keep from falling over the falls.
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There are groups of people where I live who will not accept interest due to religious beliefs, so it can be done, but I don’t know the process. Check with your bank.
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There are groups of people where I live who will not accept interest due to religious beliefs, so it can be done, but I don’t know the process. Check with your bank.
Interesting... I seem to recall of such a bank that did not give it, or take interest from loans/accounts. How it exactly worked/works I don't remember... Weren't they affiliated somehow with the Muslim faith?
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You could trade stock for a loss to reduce your income. $3,000 a year limit.
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You could trade stock for a loss to reduce your income. $3,000 a year limit.
Good point Jim.
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There are groups of people where I live who will not accept interest due to religious beliefs, so it can be done, but I don’t know the process. Check with your bank.
Interesting... I seem to recall of such a bank that did not give it, or take interest from loans/accounts. How it exactly worked/works I don't remember... Weren't they affiliated somehow with the Muslim faith?
Around here, it is certain branches of Mennonites ..........and maybe the Hutterites, too; not certain.