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Life Health > Life Insurance

Life Near the ACA Cut-Off Cliff

By Patrick Brennan

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This client is a married, self-employed cosmetologist.

Due to her spouse’s income, her income had been above 400% of the federal poverty level (FPL). In 2016, her spouse retired. Her income declined. As a result, in 2017 she qualified for the Affordable Care Act advance premium tax credit (APTC) subsidy.

Her husband died in September.

When I was planning my client’s 2018 coverage, this is what we discovered: If my client can keep her total income (self-employment plus pension) below $48,240, her bronze plan will cost $218 per month, or less.

But, if her modified adjusted gross income (MAGI) exceeds $48,240, she will lose her entire APTC, boosting the premium to $882 per month.

(Related: Gross, But Adjusted)

Of course, how my client’s income, and MAGI, will interact with the APTC cut-off cannot be predicted exactly.

So, in order for my client to avoid getting hit with a $7,990 APTC overage bill at tax time in 2019, she will have to quit working sometime before the end of 2018.

Thus does the ACA force productive people out of the workplace.

Alternatively, a smart tax person can show my client how to make as much as $6,500 over the 400% FPL line, and still avoid repaying any APTC.

Of course, my client won’t be able to file that return on a postcard.

—Read GOP Touts Simpler Tax Filing as a Goal of Reform on ThinkAdvisor.


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