The Money Mustache Community

General Discussion => Post-FIRE => Topic started by: BTDretire on January 18, 2016, 02:54:30 PM

Title: Obamacare plus Mortgage
Post by: BTDretire on January 18, 2016, 02:54:30 PM
On a whim I visited the ACA website and put in the following data, location, father, mother and two kids, ages, non smokers, and an income of $55,000 and then $51,500. The difference is an income with and without  $100,000 mortgage at 3.5%.
The ACA subsidy is increased $528  with the mortgage deduction,
---in the example I put on the website.
That is the same as reducing your 3.5% down to less than 3%.
 Just something additional to throw in the mix.
Kinda regretting not jumping on the ACA gravy train.
If Hillary is elected in Nov, I'm in.

Further info; the ACA is figured an Modified Adjusted Gross Income.
If you know of a good review of how that is calculated please post it.
Even a list of what is and is not included in MAGI would be helpful.
                                    Thanks
Title: Re: Obamacare plus Mortgage
Post by: MDM on January 18, 2016, 03:02:43 PM
See http://obamacarefacts.com/modified-adjusted-gross-income-magi/ and/or https://www.healthcare.gov/glossary/modified-adjusted-gross-income-magi/.
Title: Re: Obamacare plus Mortgage
Post by: BTDretire on January 19, 2016, 12:11:19 PM
See http://obamacarefacts.com/modified-adjusted-gross-income-magi/ and/or https://www.healthcare.gov/glossary/modified-adjusted-gross-income-magi/.

 So, in my case and I suspect most cases, MAGI is the same as AGI.
Title: Re: Obamacare plus Mortgage
Post by: brooklynguy on January 19, 2016, 01:01:51 PM
So, in my case and I suspect most cases, MAGI is the same as AGI.

That might be a fair statement, but note that, contrary to the implications of your original post, itemized tax deductions like the mortgage interest deduction decrease neither your AGI nor your MAGI.
Title: Re: Obamacare plus Mortgage
Post by: seattlecyclone on January 19, 2016, 04:53:22 PM
So, in my case and I suspect most cases, MAGI is the same as AGI.

That might be a fair statement, but note that, contrary to the implications of your original post, itemized tax deductions like the mortgage interest deduction decrease neither your AGI nor your MAGI.

Correct. The real number that matters here is the total mortgage payment ($5,388/year for a $100k 30-year fixed rate mortgage), not the mortgage interest. Someone with a mortgage will need to withdraw this much more from their accounts each year to pay the bills than someone without a mortgage. If all of your money at retirement is in traditional retirement accounts, adding $5,388/year of expenses will add that much (plus taxes) to your annual MAGI. If you have some funds in taxable accounts, an increase in cash flow from a mortgage will not increase your MAGI dollar for dollar; it will only go up to the extent that your shares have experienced gains since you bought them.
Title: Re: Obamacare plus Mortgage
Post by: jim555 on January 20, 2016, 07:27:15 AM
I bought a place for cash with the ACA in mind.  The money tied up in the condo no longer earns interest, giving me a lower MAGI, and my expenses are much lower since I have no mortgage.  So I am able to live on a much lower income than renting or having a mortgage.
Title: Re: Obamacare plus Mortgage
Post by: BTDretire on January 20, 2016, 08:50:49 AM
Interesting replies.
 I guess it is more complicated, dividends and cap gains are taxed lower.
Also if your not retired and a 40 hr worker, your income is fixed, so...
I need to look at a tax form, I thought mortgage interest would be an adjustment
in AGI. I haven't had a mortgage for 22 years.

                              Thanks
Title: Re: Obamacare plus Mortgage
Post by: Spitfire on January 20, 2016, 02:12:20 PM
Mortgage interest on your principal residence is an itemized deduction and doesn't affect your AGI. If it's an investment property and you deduct it on schedule E it would affect AGI.
Title: Re: Obamacare plus Mortgage
Post by: Trudie on January 20, 2016, 02:57:32 PM
Just print off a form 1040 and play around with it.  Better yet, if you have Turbotax or other tax prep software you can plug different scenarios and let it calculate for you.  In retirement, your sources of income make a big difference because some capital gains may not be taxed at all.  Roths aren't either.  You will need to record them on your taxes, but then the number doesn't get carried over or carried down to line 37.
Title: Re: Obamacare plus Mortgage
Post by: SomedayStache on January 20, 2016, 05:54:27 PM
A 100,000 mortgage for a married filing jointly couple will probably never impact their taxes (except maybe in the first year or two of homeownership).  This is because the standard deduction is 12,600 which is far more than the mortgage interest. 
I suppose a family could have large charitable contributions that added to their mortgage might push them over the standard deduction territory-but unlikely at the income levels in your post.
But yeah, in either case is doesn't change agi.
Title: Re: Obamacare plus Mortgage
Post by: seattlecyclone on January 20, 2016, 08:34:45 PM
Just print off a form 1040 and play around with it.  Better yet, if you have Turbotax or other tax prep software you can plug different scenarios and let it calculate for you.  In retirement, your sources of income make a big difference because some capital gains may not be taxed at all.  Roths aren't either.  You will need to record them on your taxes, but then the number doesn't get carried over or carried down to line 37.

I like the spreadsheet at excel1040.com (https://sites.google.com/site/excel1040/) for this purpose. It's so quick to change numbers and it recalculates everything for you.
Title: Re: Obamacare plus Mortgage
Post by: BTDretire on January 22, 2016, 01:20:23 PM
I now see a Mortgage deduction doesn't alter AGI.
It's a surprise to me, I just assumed it would.
I assumed wrong.
    Thanks for the info.
Title: Re: Obamacare plus Mortgage
Post by: Reynold on January 26, 2016, 08:39:26 AM
A 100,000 mortgage for a married filing jointly couple will probably never impact their taxes (except maybe in the first year or two of homeownership).  This is because the standard deduction is 12,600 which is far more than the mortgage interest. 

Depends on where you live, we have no mortgage in NJ but itemize every year because various taxes alone (property, state income, etc.) push us over the standard deduction.  If we owned a house instead of a townhouse, in fact, the property taxes alone would be really close to the standard deduction.  I'm not saying this is a good area to FIRE, mind you. . . :)
Title: Re: Obamacare plus Mortgage
Post by: SomedayStache on January 26, 2016, 08:49:19 AM
A 100,000 mortgage for a married filing jointly couple will probably never impact their taxes (except maybe in the first year or two of homeownership).  This is because the standard deduction is 12,600 which is far more than the mortgage interest. 

Depends on where you live, we have no mortgage in NJ but itemize every year because various taxes alone (property, state income, etc.) push us over the standard deduction.  If we owned a house instead of a townhouse, in fact, the property taxes alone would be really close to the standard deduction.  I'm not saying this is a good area to FIRE, mind you. . . :)
Excellent point and a good reminder that everyone's situation is unique.  Rules of thumb and assumptions are only a starting point.