ACA earning prediction

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Dave C.
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ACA earning prediction

Post by Dave C. » Mon Oct 30, 2017 9:51 pm

I am one year on Medicare, but my wife does not start Medicare until June, 2018.

In order to maintain my substantial ACA supplement I am working to keep my MAGI as low as possible for 2018.
We live on our $21,000 annual pension, some limited interest and dividends, with the balance of our living expenses coming from already taxed savings.
My question is calculating capital gains tax.
I'd like to sell approximately $40,000 of shares from my taxable equity index fund. All the resulting capital gains will be long term and my cost basis for that sale will be approximately $22,000. (Good run).
If I am calculating the capital gains on that sale correctly, I will add approximately $2700 Capital gains tax to my MAGI.

Do I have that calculation correct?

One more question. If I stay within the 15% federal tax bracket (as I will) I will pay $0 federal tax on those capital gains, though I believe the realized $2700 of capital gains tax will be added to my MAGI for purposes of the ACA supplement calculation, correct? :shock:
Easy does it/Live & Let Live/One day at a time. Thanks Bill.

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indexfundfan
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Re: ACA earning prediction

Post by indexfundfan » Mon Oct 30, 2017 10:04 pm

Dave C. wrote:
Mon Oct 30, 2017 9:51 pm
I am one year on Medicare, but my wife does not start Medicare until June, 2018.

In order to maintain my substantial ACA supplement I am working to keep my MAGI as low as possible for 2018.
We live on our $21,000 annual pension, some limited interest and dividends, with the balance of our living expenses coming from already taxed savings.
My question is calculating capital gains tax.
I'd like to sell approximately $40,000 of shares from my taxable equity index fund. All the resulting capital gains will be long term and my cost basis for that sale will be approximately $22,000. (Good run).
If I am calculating the capital gains on that sale correctly, I will add approximately $2700 Capital gains tax to my MAGI.

Do I have that calculation correct?

One more question. If I stay within the 15% federal tax bracket (as I will) I will pay $0 federal tax on those capital gains, though I believe the realized $2700 of capital gains tax will be added to my MAGI for purposes of the ACA supplement calculation, correct? :shock:
You will add $40,000 - $22,000 = $18,000 to your MAGI (not $2700).
Correct, if you are in the 15% federal bracket, there is no federal tax on LTCG. However, other factors will come into play, e.g. ACA subsidy.
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scrabbler1
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Re: ACA earning prediction

Post by scrabbler1 » Mon Oct 30, 2017 10:10 pm

Dave C. wrote:
Mon Oct 30, 2017 9:51 pm
I am one year on Medicare, but my wife does not start Medicare until June, 2018.

In order to maintain my substantial ACA supplement I am working to keep my MAGI as low as possible for 2018.
We live on our $21,000 annual pension, some limited interest and dividends, with the balance of our living expenses coming from already taxed savings.
My question is calculating capital gains tax.
I'd like to sell approximately $40,000 of shares from my taxable equity index fund. All the resulting capital gains will be long term and my cost basis for that sale will be approximately $22,000. (Good run).
If I am calculating the capital gains on that sale correctly, I will add approximately $2700 Capital gains tax to my MAGI.

Do I have that calculation correct?

One more question. If I stay within the 15% federal tax bracket (as I will) I will pay $0 federal tax on those capital gains, though I believe the realized $2700 of capital gains tax will be added to my MAGI for purposes of the ACA supplement calculation, correct? :shock:
I am already about to have this happen to me for 2017. I saw an estimate for a year-end cap gains distribution in a stock fund and I will end up with a whopping $23,000 LTCG. It will be taxed at 0% federal, but it will put me over the MAGI cliff for an ACA subsidy and cost me $700. I will also owe some state income taxes on it. It will also reduce my deductible medical expenses because of the 10%-of-AGI exclusion, although I can then take the SD and bunch some deductible expenses into 2018 to recoup some of the extra taxes due in 2017.

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indexfundfan
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Re: ACA earning prediction

Post by indexfundfan » Mon Oct 30, 2017 10:16 pm

scrabbler1 wrote:
Mon Oct 30, 2017 10:10 pm
Dave C. wrote:
Mon Oct 30, 2017 9:51 pm
I am one year on Medicare, but my wife does not start Medicare until June, 2018.

In order to maintain my substantial ACA supplement I am working to keep my MAGI as low as possible for 2018.
We live on our $21,000 annual pension, some limited interest and dividends, with the balance of our living expenses coming from already taxed savings.
My question is calculating capital gains tax.
I'd like to sell approximately $40,000 of shares from my taxable equity index fund. All the resulting capital gains will be long term and my cost basis for that sale will be approximately $22,000. (Good run).
If I am calculating the capital gains on that sale correctly, I will add approximately $2700 Capital gains tax to my MAGI.

Do I have that calculation correct?

One more question. If I stay within the 15% federal tax bracket (as I will) I will pay $0 federal tax on those capital gains, though I believe the realized $2700 of capital gains tax will be added to my MAGI for purposes of the ACA supplement calculation, correct? :shock:
I am already about to have this happen to me for 2017. I saw an estimate for a year-end cap gains distribution in a stock fund and I will end up with a whopping $23,000 LTCG. It will be taxed at 0% federal, but it will put me over the MAGI cliff for an ACA subsidy and cost me $700. I will also owe some state income taxes on it. It will also reduce my deductible medical expenses because of the 10%-of-AGI exclusion, although I can then take the SD and bunch some deductible expenses into 2018 to recoup some of the extra taxes due in 2017.
I assume you already checked that the capital gains on this fund is greater than $23,000? Otherwise, get rid of the fund before the distribution and buy a replacement fund.
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scrabbler1
Posts: 1986
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Re: ACA earning prediction

Post by scrabbler1 » Mon Oct 30, 2017 10:33 pm

indexfundfan wrote:
Mon Oct 30, 2017 10:16 pm
scrabbler1 wrote:
Mon Oct 30, 2017 10:10 pm
Dave C. wrote:
Mon Oct 30, 2017 9:51 pm
I am one year on Medicare, but my wife does not start Medicare until June, 2018.

In order to maintain my substantial ACA supplement I am working to keep my MAGI as low as possible for 2018.
We live on our $21,000 annual pension, some limited interest and dividends, with the balance of our living expenses coming from already taxed savings.
My question is calculating capital gains tax.
I'd like to sell approximately $40,000 of shares from my taxable equity index fund. All the resulting capital gains will be long term and my cost basis for that sale will be approximately $22,000. (Good run).
If I am calculating the capital gains on that sale correctly, I will add approximately $2700 Capital gains tax to my MAGI.

Do I have that calculation correct?

One more question. If I stay within the 15% federal tax bracket (as I will) I will pay $0 federal tax on those capital gains, though I believe the realized $2700 of capital gains tax will be added to my MAGI for purposes of the ACA supplement calculation, correct? :shock:
I am already about to have this happen to me for 2017. I saw an estimate for a year-end cap gains distribution in a stock fund and I will end up with a whopping $23,000 LTCG. It will be taxed at 0% federal, but it will put me over the MAGI cliff for an ACA subsidy and cost me $700. I will also owe some state income taxes on it. It will also reduce my deductible medical expenses because of the 10%-of-AGI exclusion, although I can then take the SD and bunch some deductible expenses into 2018 to recoup some of the extra taxes due in 2017.
I assume you already checked that the capital gains on this fund is greater than $23,000? Otherwise, get rid of the fund before the distribution and buy a replacement fund.
The unrealized gain on that fund is about $88,000, more than triple the cap gain distribution. Got nowhere to hide.

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indexfundfan
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Re: ACA earning prediction

Post by indexfundfan » Mon Oct 30, 2017 10:43 pm

scrabbler1 wrote:
Mon Oct 30, 2017 10:33 pm
indexfundfan wrote:
Mon Oct 30, 2017 10:16 pm
I assume you already checked that the capital gains on this fund is greater than $23,000? Otherwise, get rid of the fund before the distribution and buy a replacement fund.
The unrealized gain on that fund is about $88,000, more than triple the cap gain distribution. Got nowhere to hide.
Is this an active fund? If this happens every year, it might be time to consider a one time pain to sell (part of) it.
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