ACA Prem Credits

[Burke]

It looks like these credits (are they the same as "subsidies?") are predicated on income tied to Federal Poverty levels. My question is, when calculating this income, do you count non-taxable income? Such as 401k plans, Sect 125 plans, tax-free investments, DCB benefits, etc.
I feel most low-income persons would not have these, but I have a client who does, and looks as though they will qualify.

[mactoolsix]

From TD 9590, Health Insurance Premium Tax Credit

http://www.gpo.gov/fdsys/pkg/FR-2012-05-23/pdf/2012-12421.pdf

page 2:

c. Modified Adjusted Gross Income
Under the proposed regulations,
modified adjusted gross income is
adjusted gross income increased by
amounts excluded from gross income
under section 911 and tax-exempt
interest a taxpayer receives or accrues
during the taxable year. The 3%
Withholding Repeal and Job Creation
Act, Public Law 112–56 (125 Stat. 711
(2011)), which was enacted after the
proposed regulations were published,
amended the definition of modified
adjusted gross income to include Social
Security benefits (as defined in section
86(d)) not included in gross income
under section 86. The final regulations
reflect this amendment.

From the IRS FAQ - Premium Tax Credits

http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-the-Premium-Tax-Credit

7. What is household income?

For purposes of the premium tax credit, your household income is your modified adjusted gross income plus that of every other individual in your family for whom you can properly claim a personal exemption deduction and who is required to file a federal income tax return. Modified adjusted gross income is the adjusted gross income on your federal income tax return plus any excluded foreign income, nontaxable Social Security benefits (including tier 1 railroad retirement benefits), and tax-exempt interest received or accrued during the taxable year. It does not include Supplemental Security Income (SSI).

Thus AGI + excluded foreign income + non-taxable SS (except SSI) + tax-exempt interest
401k income is usually taxable

Sec 125 benefits usually non-taxable
Dependent care benefits (if used) would not be included
Roth IRA distributions would not be included

Mike

[TaxGuyBill]

Although it's not an official source, here is a simplified summary as well as the actual law:

http://laborcenter.berkeley.edu/healthcare/MAGI_summary13.pdf

http://www.law.cornell.edu/uscode/text/26/36B#d_2

Also, make sure you realize that it is the HOUSEHOLD income.

[John of PA]

Retirement fund withdrawls would have to be included, if not, then someone with a 200,000 a year pension could get a reduced premium.

[Burke]

Yes, pensions would be included in AGI if paid to the TP and entered on the tax return. I was thinking of the 401k contribution excluded from taxable income on the W-2. And since it is not part of AGI, and not one of the items to be added back, then it would not be a factor. Nor would VA benefits apparently, since they would not be part of AGI/MAGI either.