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Covered California Q&A

Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.

Premium Subsidy Eligible Income

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Question: I made some ROTH IRA conversion which shows up as taxable income. It is clear for anyone to see that it is not a real income in the normal sense. It most certainly is not a repeatable income. So, it makes no sense to include that as income when projecting for a future year. Could you please clarify, and let me know if there is any way around this situation? Coming up with full premium amounts for the entire year would stretch my finances even if they would be refunded later on.

Answer: Yes. Any IRA distributions would be included in your adjusted gross income (AGI) for that tax year. Your eligibility for a subsidy will depend on your modified adjusted gross income (MAGI). How is it modified? The online application process will automatically use the AGI from your most recent 1040 as a starting point. Then you’ll be asked to estimate your annual income in the year in which you are to be insured, 2014 initially.

1 Comment

I totally understand your frustration in asking this question. I CONVERT $10K - $20K from a Traditional IRA to a Roth IRA every year. 1040 supporting form 8606 Part II clearly identifies this value as a CONVERSION but it is described as an IRA DISTRIBUTION on the 1040 form. Although taxable, it makes absoutely no sence to be considered INCOME (it was Income accumulated over the last 35 years of contributions to a Traditional IRA). It’s hard to believe this conversion amount would not be subtracted out of AGI (line 37) for income subsidy qualification purposes. I would greatly appreciate notification if anyone crafting this ACA policy realizes this illogic and implements a revision to make an adjustment for this type of IRA - ROTH CONVERSION!

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