Author Topic: Taking ACA subsidies at year end to "manufacture" spending  (Read 885 times)

Mr. Green

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Taking ACA subsidies at year end to "manufacture" spending
« on: June 21, 2018, 08:22:56 AM »
Is anyone taking their ACA subsidies at tax time rather than up front so that they can use the monthly premiums to "manufacture" spending on credit cards for the rewards? How is that working out?

When signing up for a healthcare plan on the ACA you can choose to pay the full premium up front and reconcile everything when filing your taxes. This is something I've been thinking about as my wife is getting ready to leave her job. The subsidy we're going to get is about $1,000 a month, so we'd be getting a $12,000 refund on our taxes at the end of a full year.

When my wife stops working and we're both FIRE I think we'll have some difficulty manufacturing the spend that some cards require in order to earn bonuses in the first few months. If we paid our full premiums up front it would automatically give us enough spending to meet any requirement needed to make a bonus. We plan on travel hacking with credit card reward points as much as reasonable so this would be a boon for accomplishing that. The money for the premiums would come from our cash set aside for living expenses so we'd be trading any interest we could have earned in an online savings account for whatever the rewards from a credit card would be.

bacchi

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Re: Taking ACA subsidies at year end to "manufacture" spending
« Reply #1 on: June 21, 2018, 08:27:29 AM »
Does your insurer take plastic? My 2017 insurer did; my 2018 insurer takes ACH only.

Monkey Uncle

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Re: Taking ACA subsidies at year end to "manufacture" spending
« Reply #2 on: June 21, 2018, 08:45:19 AM »
Personally, I would not try it because our annual premium without the subsidy is over $20k.  To pay the monthly credit card bills, I'd have to cash out investments, which would generate capital gains, which would increase my MAGI, and possibly incur taxes above the 0% rate.  I haven't run the numbers to be sure, but I suspect the loss of subsidies due to the increase in MAGI would more than negate the credit card rewards. 

However, I probably need to think a little harder about using seasoned Roth contributions to pay the bills, which would not count toward MAGI. That would use up tax-free money that I'm conserving for other real expenditures, but I'd get the cash back at tax refund time.  That might actually work, if I could come up with enough seasoned Roth money every year.

YMMV.

Proud Foot

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Re: Taking ACA subsidies at year end to "manufacture" spending
« Reply #3 on: June 21, 2018, 08:53:15 AM »
If your insurer takes credit card and you have the money available to pay them each month or float until the end of the sign up interest free period then I don't see a problem with this. Guessing you should be able to meet the spend requirements to qualify for 4-6 bonuses. Even doing one sign up bonus would make you more than if you were to keep the money in your savings account throughout the year.

robartsd

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Re: Taking ACA subsidies at year end to "manufacture" spending
« Reply #4 on: June 21, 2018, 08:58:53 AM »
That might actually work, if I could come up with enough seasoned Roth money every year.
Just need enough money to get through to when you get the subsidy - then hold onto the cash to pay the next year's premiums - no need to come up with new money every year.

Monkey Uncle

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Re: Taking ACA subsidies at year end to "manufacture" spending
« Reply #5 on: June 21, 2018, 12:40:27 PM »
That might actually work, if I could come up with enough seasoned Roth money every year.
Just need enough money to get through to when you get the subsidy - then hold onto the cash to pay the next year's premiums - no need to come up with new money every year.

Yep, that makes sense.  Now I just need to check and see if my insurer takes plastic...