Are you enrolled in Obamacare (Affordable Care Act)? The ACA can be complex and there are an ocean of subsidies, deductions and math to wade through. We’ll help explain some simple methods to properly plan your taxes under an Obamacare enrollment.
Let’s break this down into 3 Tiers:
Open an IRA to reduce your subsidy repayment
Reduce taxable income to increase available subsidies
Planning your 2019 taxes under Obamacare
Covering the Basics on Being Covered
Ok, first we need to make sure you’ve identified your Modified Adjusted Gross Income (MAGI). It’s not hard to calculate, and this determines a lot about your subsidies and tax deductions under Obamacare. Click here to learn more about your MAGI.
Now, you’ll want to ensure your MAGI remains at 400% of the Federal Poverty level. Once it exceeds this, the subsidies you owe back will increase. Let’s explore how you can avoid this.
Future Savings Can Save You Today
Lowering your taxable income through IRA contributions can help with your MAGI. By bringing your taxable income down, you could potentially offset any need to repay some, part, or all of your enrollment subsidy. This is a double-edged sword as well, considering the more you have set aside for your future the better. More planned savings, less subsidy payback.
Exploring Your Options
Reducing your MAGI through various deductions can also bring down your potential need to repay portions of enrollment subsidies. We’ve discussed the IRA options, but what other methods can you employ? Here’s a few places to start:
Student Loan interest
Of course, consulting with a tax professional is the best way to handle this, but if any of the above standout to you, it’s probably a good point to bring up in your planning sessions.
Planning Your Taxes Can Be Taxing
Ok, no one wants to start talking about tax season. It’s so far away, and it’s not nearly as fun as Christmas. But the life events that happen throughout the year can play a role in how you address your taxes. It’s not a bad idea to get ahead of these and always do some planning, as they can effect your enrollment status as well. Here’s a few events that could play a major impact.
Experiencing healthcare costs outside of your insurance coverage
This can effect your taxes and your MAGI based on how you file
Selling a house
Taking any hardship exemptions
Or, if your Income is lower than expected (remember, your MAGI and enrollment will be centered around your projected income).
Yes, this is a lot. And it’s not an easy topic to address, but with proper planning and some professional guidance, your enrollment doesn’t have to be complicated or complex. Just remember to keep that MAGI low, explore your deductions, and consult with a professional after major life changes.
MBhealth is a health insurance agency servicing the St. Louis area and Southern Illinois. We are here to help you find the healthcare plan that is best for you and your family. Call us Monday - Friday 8 - 5 at (314) 544-5400 or fill out our contact form to get the process started!