Taxable Income, MAGI, and AGI Confusion (also secondary ACA question)

[Rollin]

I'm trying to finish up my spreadsheets for FIRE (FIRE early next year) and am checking every detail I can think of.  Today in reading about the Affordable Care Act and Modified Adjusted Gross Income I may have confused myself.  I have deductions for mortgage interest and taxes on my home, plus deductions for my rental property, and of course deductions for my children but I'm not sure if that matters to AGI.  I kind of get the MAGI as it add back in things like contributions to an IRA.  Anyway, can someone start me from the bottom (be easy with me!) and bring me up to speed?

Related ACA question.  I cannot find this answer anywhere, but it seems to be implied.  When you apply for ACA you get a cost for the coverage, but it does not say if that is per person or for the entire family entered.  It appears to be implied that the cost is for the entire family, but that is not clear anywhere - and I called the help line and asked that question very specifically and did not get an answer.  I actually asked the question three times and the guy was either a master at avoiding answering me directly, or he truly didn't understand my question.

[MDM]

I'm trying to finish up my spreadsheets for FIRE (FIRE early next year) and am checking every detail I can think of.  Today in reading about the Affordable Care Act and Modified Adjusted Gross Income I may have confused myself.  I have deductions for mortgage interest and taxes on my home, plus deductions for my rental property, and of course deductions for my children but I'm not sure if that matters to AGI.  I kind of get the MAGI as it add back in things like contributions to an IRA.  Anyway, can someone start me from the bottom (be easy with me!) and bring me up to speed?

If you are doing spreadsheets anyway, doing one for your Form 1040 entries would be worthwhile.  Then you could calculate MAGI directly from the definition.

In short, anything appearing on the second page of Form 1040 (e.g., mortgage interest and taxes on your home) will have no effect on (M)AGI.  Your rental property is different because that hits on the first page of 1040.

[Rollin]

That's what I thought and I don't like that answer!  But thank you...

My CPA is hard to get simple answers from, so I might think of getting another one to help with my forecasts.  He does great for the past year, but I don't seem to get a straight answer on my questions that are related to my future.

[charis]

In short, anything appearing on the second page of Form 1040 (e.g., mortgage interest and taxes on your home) will have no effect on (M)AGI.  Your rental property is different because that hits on the first page of 1040.

Where are the deductions related to rental properties taken on the first page of the 1040?  I am looking the form and I don't see it on either page.

[forummm]

I'm trying to finish up my spreadsheets for FIRE (FIRE early next year) and am checking every detail I can think of.  Today in reading about the Affordable Care Act and Modified Adjusted Gross Income I may have confused myself.  I have deductions for mortgage interest and taxes on my home, plus deductions for my rental property, and of course deductions for my children but I'm not sure if that matters to AGI.  I kind of get the MAGI as it add back in things like contributions to an IRA.  Anyway, can someone start me from the bottom (be easy with me!) and bring me up to speed?

Related ACA question.  I cannot find this answer anywhere, but it seems to be implied.  When you apply for ACA you get a cost for the coverage, but it does not say if that is per person or for the entire family entered.  It appears to be implied that the cost is for the entire family, but that is not clear anywhere - and I called the help line and asked that question very specifically and did not get an answer.  I actually asked the question three times and the guy was either a master at avoiding answering me directly, or he truly didn't understand my question.

To get your MAGI, just fill out a 1040 and it will be clear from that. Look at your 2014 return. It will be the lines associated with health insurance premium tax credit reconciliation (I forget where that is exactly).

If you're talking about healthcare.gov, when you enter in your family details and get quotes, they are quotes for the entire family combined (total), not per person. The call center people are reading off of scripts and are not familiar with things generally.

[MDM]

In short, anything appearing on the second page of Form 1040 (e.g., mortgage interest and taxes on your home) will have no effect on (M)AGI.  Your rental property is different because that hits on the first page of 1040.

Where are the deductions related to rental properties taken on the first page of the 1040?  I am looking the form and I don't see it on either page.

They are taken on Schedule E, the net result of which then hits line 17 of Form 1040.

[Rollin]

FIRE date May 2016

Line 37 on my 1040:
2014 was $101,800
2015 looks like it will be $63,300
2016 likely about $55,000

I'll have to work at this a little more to see if I can get below the threshold for the 2015 number.

Another question - line 29 asked for "Self-employed health insurance deduction."  Does anyone know if this is the full cost of the health insurance payment (either through ACA or without the subsidy)?

[MDM]

Another question - line 29 asked for "Self-employed health insurance deduction."  Does anyone know if this is the full cost of the health insurance payment (either through ACA or without the subsidy)?

Great question.  I got through Form 1040 Instructions for Line 29, Publication 535, and started on Publication 974 before deciding to turn it back to you (or anyone else) with more vested interest in the answer.  ;)
Good luck!

[Rollin]

Another question - line 29 asked for "Self-employed health insurance deduction."  Does anyone know if this is the full cost of the health insurance payment (either through ACA or without the subsidy)?

Great question.  I got through Form 1040 Instructions for Line 29, Publication 535, and started on Publication 974 before deciding to turn it back to you (or anyone else) with more vested interest in the answer.  ;)
Good luck!

I'll be setting up an appointment with my CPA in the next few weeks and if we don't hear anything before that I'll update this thread.

[seattlecyclone]

Another question - line 29 asked for "Self-employed health insurance deduction."  Does anyone know if this is the full cost of the health insurance payment (either through ACA or without the subsidy)?

Great question.  I got through Form 1040 Instructions for Line 29, Publication 535, and started on Publication 974 before deciding to turn it back to you (or anyone else) with more vested interest in the answer.  ;)
Good luck!

I just started down this path. This is complicated! It looks like the law prohibits you from taking the deduction for the portion of your premium that was reimbursed by the tax credit. Simple enough, right? The complication comes from the fact that the self-employed premium deduction lowers your MAGI, which increases your premium tax credit, which reduces the amount you can deduct, which increases your MAGI, which decreases your premium tax credit, and so on. The IRS's answer to this conundrum is the "iterative method" where you go back and forth until the amounts change by less than a dollar each time, and then you've arrived at your final deduction and premium tax credit.

[Tyler]

The natural confusion of the tax code sure is fun!  :)

One good method I found is to use TurboTax.  As of last year, it also calculates ACA subsidies. You can start as many new returns as you like to model various income scenarios -- just don't file the results.   

Related ACA question.  I cannot find this answer anywhere, but it seems to be implied.  When you apply for ACA you get a cost for the coverage, but it does not say if that is per person or for the entire family entered.  It appears to be implied that the cost is for the entire family, but that is not clear anywhere

When I signed up, the quoted premiums on the heathcare.gov website were for the whole family.  I can't speak for the individual state exchanges.  Things like the OoP max can get a little complicated regarding individual vs. family, so read the fine print. 

[Rollin]

The natural confusion of the tax code sure is fun!  :)

One good method I found is to use TurboTax.  As of last year, it also calculates ACA subsidies. You can start as many new returns as you like to model various income scenarios -- just don't file the results.   

That is a great idea.  Much better to play my scenarios there (pay for the program) then sit with my CPA for $100/hour!  I can run my results past him if I need to when I'm done.