ACA Tax Credit/Deduction Estimator (leanfire)

Suggestions

:speech_balloon:

ACA Tax Credit/Deduction Estimator (leanfire)

This could be a standalone tool as an initial component, but it would really shine as an integrated component.

The ACA tax credit has some tricky elements that make it onerous for a regular person to calculate it. The amount varies by ACA MAGI, which can be tough for people to estimate and will change based on other choices people make. It also uses family size, and the second lowest cost silver plan for your zipcode. So there’s a bit of data gathering problem to solve each year, as new regional costs are published for the “Second lowest cost silver plan”.

It also has some interesting interactions with self-employment income. e.g. you get a tax credit based on a special ACA MAGI (similar to the Roth MAGI, but not quite the same), and if you’re self-employed you get to deduct your insurance premiums that are not covered by your ACA credit – this creates an interesting iterative calculation, since the tax deduction lowers your income, which then increases your ACA credit, which lowers your deduction, etc. There’s a whole IRS publication on how to calculate this for self-employed people.

So as a standalone tool you could make it easy for people by having all the regional cost data in the backend, so that folks can just put their family size and zip code, and you could even give an estimate for the ACA deduction if they’re self-employed. But this would only be accurate for a snapshot in time, based on fixed income.

The integrated version of this would simply ask the person if they are buying an ACA plan, the cost of the plan (credit can’t be more than the cost), their zip code and number of covered family members (or would know it from other info given).

The US tax estimator wouldn’t need much more work to calculate the ACA tax credit and ACA tax deduction for self-employed. So if you decide to build the standalone estimator as a first pass, you may find it’s not that much more work to build an integrated credit calculator. I’ve actually done both versions of this with google sheets and apps scripts, it’s not that much work.

29 votes

Tagged as Suggestion

Suggested 19 April 2022 by user Shawn S

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19 April 2022 Shawn S suggested this task
19 April 2022 Kyle Nolan approved this task
Paul

Would be great to combine this with Roth IRA conversions to automatically model conversions to generate income to meet ACA minimums

24 October 2022
Solo Writer

Oh, most definitely upvote this!

The only tool that I’m aware of that gives a good breakdown of ACA Premiums vs Roth Conversions, which many FIRE folks fret over, is the Case Study Spreadsheet from the Mr Money Mustache Blog. It has a line graph built in that shows you what happens to your subsidies and marginal tax rate, with the assumption that the loss of subsidies amounts to an additional tax.

The Finance Buff has a good walk through article of this here: https://thefinancebuff.com/tax-calculator-aca-obamacare-subsidy.html

It would be great if the tool asked you how you were going to address healthcare before Medicare. Then, you could give options ACA with subsidies, ACA without subsidies, etc.

The next option would then ask about Roth conversions, with the goal of optimizing maximum ACA subsidies and Roth conversions simultaneously.

While you would only have concrete data about the cost of ACA plans for the first couple years, extrapolating from there could at least help to plan directionally.

For example, if the tool told you maximum conversion amount to keep full ACA subsidies, you could plan out how to manufacture income to the amount you needed to cover expenses, then plan conversions to fill up the rest of the income space.

This is a feature I’ve been looking for. I’ve heard Pralana Online has this capability, but having the visual components of a tool like PL show me this would make a world of difference.

24 January
Solo Writer

Alternatively, you could have a toggle switch in the Roth conversion section of each pre-tax account that says, “Only convert up to full ACA subsidy limit.”

Future add ons could include breaking that down to 75%, 50% and 25%.

That would really help people trying to optimize wrestling with getting the ACA subsidy vs doing Roth conversions.

24 January
Craig

Really need this badly

12 February