Open registration for the Affordable Care Act starts on November 15. If you’re an early retiree, particularly between the ages 55 and 64, then you have the chance to acquire big tax credits so as to meet the expense of your health insurance if you purchase it by means of health care exchange.
Moreover, if you do it right, then you can even acquire subsidies in order to help decrease your out-of-pocket expenses. To do this, it will take very careful planning.
There are 4 steps to this method:
Know how much cash you require for your expenses in 2015, and where your cash would come from.
Plan to acquire your salary on your income tax return (this includes tax-free income) to above a hundred percent poverty level within states that did not expand Medicaid as well as a hundred thirty-eight percent in states that expanded Medicaid but below four-hundred percent poverty level.
Once the income hits four hundred percent poverty level, you entirely lose tax credits.
If you can acquire adjusted taxable income less than 250% poverty level, then request a silver level plan. This will make you eligible for the cost-sharing tax credits so as to aid meet deductibles.
Monitor your deductions and income all through 2015 to ensure you don’t fall below the poverty level or wind up above the four-hundred percent poverty level threshold.
I will now explain these steps thoroughly.
Know your living expenses in 2015 as well as where that cash will be coming from:
Where you pull cash to eke out a living isn’t similar as how much money you request on your tax return. For instance, if you require $5,000 per month for expenditures, where will you get that cash from?
Here are a few cases:
If you have 60,000 in your savings account, then you can utilize that cash to eke out a living. You won’t have to pull anything out of your retirement accounts, and essentially keep cash on your tax return at extremely low levels.
What would appear on your tax return are interest and dividends. Be careful, interest and dividends should be higher than the poverty level.
If you have several cash in savings and tax-deferred retirement accounts, then you can pull 24,000 (plus cash to pay taxes) out of your retirement accounts, and get the rest from taxable investment accounts or savings accounts.
This will still make you eligible for an insurance tax credit if overall income is maintained below four-hundred percent poverty level.
If tax-deferred retirement accounts are all you have, you’ll be unfortunate. You will have to entirely take the $60,000 you require to survive out of those accounts. This would put you over four-hundred percent poverty level, and you won’t get tax credits.
Good news – Roth IRA account withdrawals don’t count in the calculation of income.