HCR-What Counts As "Income"?

[Full Throttle]

Not sure if you guru's have any answers, but I would be curious to get your take on it:

Income Subsidies - Your premium is capped based on your percentage of the federal poverty level* as follows (based on the silver plan premiums, second lowest coverage):

Up to 133% FPL = 2% Annual Premium as % of Income
133% to 150% FPL = 3% to 4%
150% to 200% FPL = 4% to 6.3%
200% to 250% FPL = 6.3% to 8.05%
250% to 300% FPL = 8.05% to 9.5%
300% to 400% FPL = 9.5%

*FPL in 2012: Single = $11,170, 2 People = $15,130, 3 People = $19,090, 4 People = $23,050, 5 People = $27,010.

If you are 400% or below, that really is a hell of a benefit. If my family has four people and I make $90,000, my premiums for the entire family are capped at $712 per month. It gets any better when my out of pocket maximum is capped lower as well due to the out of pocket subsidies if under 400% FPL. Not a bad deal, better if you make less money. Of course, those who are at $95,000 will feel like they are getting a free colonoscopy. Stock up on alcohol guys, it will dull the pain.

So, here's my question: What counts as income?

AGI?
W-2?
Schedule C for the sole proprietors?

If I own a machine shop as an S-Corp and take a $40,000 a year W-2 income but cash flow much more out of the business that is not taxed due to depreciation, am I under 200% of the federal poverty level (as a family of four)? I have plenty of clients who fit this mold. Wife works in the business, but not on payroll. So, no other family income.

Anyone see anything concrete on this?

 

[Yagents]

Not sure if you guru's have any answers, but I would be curious to get your take on it:

Income Subsidies - Your premium is capped based on your percentage of the federal poverty level* as follows (based on the silver plan premiums, second lowest coverage):

Up to 133% FPL = 2% Annual Premium as % of Income
133% to 150% FPL = 3% to 4%
150% to 200% FPL = 4% to 6.3%
200% to 250% FPL = 6.3% to 8.05%
250% to 300% FPL = 8.05% to 9.5%
300% to 400% FPL = 9.5%

*FPL in 2012: Single = $11,170, 2 People = $15,130, 3 People = $19,090, 4 People = $23,050, 5 People = $27,010.

If you are 400% or below, that really is a hell of a benefit. If my family has four people and I make $90,000, my premiums for the entire family are capped at $712 per month. It gets any better when my out of pocket maximum is capped lower as well due to the out of pocket subsidies if under 400% FPL. Not a bad deal, better if you make less money. Of course, those who are at $95,000 will feel like they are getting a free colonoscopy. Stock up on alcohol guys, it will dull the pain.

So, here's my question: What counts as income?

AGI?
W-2?
Schedule C for the sole proprietors?

If I own a machine shop as an S-Corp and take a $40,000 a year W-2 income but cash flow much more out of the business that is not taxed due to depreciation, am I under 200% of the federal poverty level (as a family of four)? I have plenty of clients who fit this mold. Wife works in the business, but not on payroll. So, no other family income.

Anyone see anything concrete on this?

Cost sharing subsidies are only available for those between 100-250% of FPL. So, no soup for you.

BTW, if you are above 400% FPL, I don't think there is a cap on the % of your income you will pay in premiums. Whatever the cost is, is what it is. Hence the importance of staying GF if possible.

AGI includes W-2 income. Just look at your 1040 tax form, first page. I'm an S corp, pay myself a salary, but also report on line 17, the profit in my S corp above the salary I pay myself. Interest, cap gains, etc are also above the line. But, I also get to deduct IRA/HSA contributions to lower my bottom line AGI on 1040. Technically it's MAGI, which adds back in tax free muni bonds, & other crap that I'm not involved with.

 

[Full Throttle]

Cost sharing subsidies are only available for those between 100-250% of FPL. So, no soup for you.

BTW, if you are above 400% FPL, I don't think there is a cap on the % of your income you will pay in premiums. Whatever the cost is, is what it is. Hence the importance of staying GF if possible.

AGI includes W-2 income. Just look at your 1040 tax form, first page. I'm an S corp, pay myself a salary, but also report on line 17, the profit in my S corp above the salary I pay myself. Interest, cap gains, etc are also above the line. But, I also get to deduct IRA/HSA contributions to lower my bottom line AGI on 1040. Technically it's MAGI, which adds back in tax free muni bonds, & other crap that I'm not involved with.

You are correct on the bolded part, my mistake. So, it is MAGI. Good to know.
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As long as one is below the 400% FPL on adjusted gross income, which was $92,220 in 2012 for a family of four, it really won't have much impact on you. In fact, you are better off than you are likely today. And the medical inflation you pay will never rise more than your wages in a given year if you stay below $92,220.

Given you can plow money into a SIMPLE/SEP as an above the line deduction to reduce your MAGI, many people will have a lot of control to reduce their exposure to this thing if they can keep their standard of living below the 4X FPL MAGI number. Go over that number, now it hurts. The people who will feel the pinch the most are the people just above that number, what I would call the middle class. The rich won't care that much (although they will be paying most of the burden), the poor will get huge subsidies, the middle class will take it in the shorts.

The only questions I have, if there is so much being doled out in subsidies, where is the money coming from? Increased benefits and lower premiums for the majority of the population. I would be curious to know what % of the population is below the 400% FPL.

 

[AllenChicago]

Cost sharing subsidies are only available for those between 100-250% of FPL. So, no soup for you.

BTW, if you are above 400% FPL, I don't think there is a cap on the % of your income you will pay in premiums. Whatever the cost is, is what it is. Hence the importance of staying GF if possible.

YAgents as usual, you're a wealth of information! After reading your statements I went to the new Subsidy Calculator...

Ref: National Health Care Calculator

And right you are.. there is NO CAP on the premium for any taxpayer who earns more than 400% of Federal Poverty Level. A single guy/gal who earns more than $45,000 will pay at least $475 a month in premiums..get no subsidy and still have to pay up to $6,000 out-of-pocket each year for medical care. WOW.

It indeed will be very important for those who are just over 400% of FPL to do what is necessary to get their income (on paper) reduced to less than that threshold.

But I don't understand why you stated that subsidies are only available up to 250% of FPL. The calculator shows subsidies right up to 399%. Did the Fiscal Cliff deal reduce the eligibility ceiling?
-Allen

 

[Yagents]

YAgents as usual, you're a wealth of information! After reading your statements I went to the new Subsidy Calculator...

Ref: National Health Care Calculator

And right you are.. there is NO CAP on the premium for any taxpayer who earns more than 400% of Federal Poverty Level. A single guy/gal who earns more than $45,000 will pay at least $475 a month in premiums..get no subsidy and still have to pay up to $6,000 out-of-pocket each year for medical care. WOW.

It indeed will be very important for those who are just over 400% of FPL to do what is necessary to get their income (on paper) reduced to less than that threshold.

But I don't understand why you stated that subsidies are only available up to 250% of FPL. The calculator shows subsidies right up to 399%. Did the Fiscal Cliff deal reduce the eligibility ceiling?
-Allen

Allen, there are 2 separate types of subsidies that you are confusing. One is the premium subsidy for those up to 400% FPL, and the other that I was referencing is the "cost sharing" subsidy available to those up to 250% FPL to help those folks pay for the out of pocket expenses (who are also getting premium subsidies).

FYI, 2014 subsidies will be based on 2012 MAGI, so there are only a few ways to lower that number for the next few months.

Thanks for the new calculator, I plan on playing around with it now.

 

[AllenChicago]

Allen, there are 2 separate types of subsidies that you are confusing. One is the premium subsidy for those up to 400% FPL, and the other that I was referencing is the "cost sharing" subsidy available to those up to 250% FPL to help those folks pay for the out of pocket expenses (who are also getting premium subsidies).

FYI, 2014 subsidies will be based on 2012 MAGI, so there are only a few ways to lower that number for the next few months.

Thanks for the new calculator, I plan on playing around with it now.

TWO separate types of subsidies!?!? Our country can't afford even one. So you're saying that people between 138% and 250% of the FPL will receive taxpayer money to help them pay their premium AND their deductible, coinsurance, etc.? That is INSANE. I'll do some research to see if the lesser-known subsidy has a name. Hopefully, it will be killed off in the upcoming debt ceiling negotiations.
-ac

 

[Yagents]

TWO separate types of subsidies!?!? Our country can't afford even one. So you're saying that people between 138% and 250% of the FPL will receive taxpayer money to help them pay their premium AND their deductible, coinsurance, etc.? That is INSANE. I'll do some research to see if the lesser-known subsidy has a name. Hopefully, it will be killed off in the upcoming debt ceiling negotiations.
-ac

The name of it is "cost sharing" subsidy. This is another reason why I believe that employers will be screwing families of the employee if they offer "affordable" group coverage, and the families can't get subsidies.