How to Maximize ACA Health Insurance Subsidies Through Smart Investment Strategies

The Affordable Care Act (ACA), also known as Obamacare, provides financial assistance to individuals and families who need help paying for health insurance. This assistance comes in the form of premium tax credits and cost-sharing reductions.

To qualify for ACA subsidies, your income must fall within certain limits. For 2023, the income limit is 150% of the federal poverty level (FPL). For a single person, this means an income of up to $20,330. For a family of four, the income limit is $42,660.

If your income is above the limit, you may still be able to get some help paying for health insurance. However, the amount of assistance you receive will be reduced.

Two strategies you need to know to make the most of ACA subsidies are:

1. Tax-Gain Harvesting
2. Roth Conversion Ladder

Tax-Gain Harvesting (TGH) is a strategy that involves selling investments that have appreciated in value and then reinvesting the proceeds in similar investments. This allows you to realize capital gains without paying taxes on them. TGH can be a helpful way to reduce


and qualify for ACA subsidies.

Roth Conversion Ladder is a strategy that involves converting money from a traditional IRA to a Roth IRA. Roth IRAs are funded with after-tax dollars, but withdrawals are tax-free. Converting money from a traditional IRA to a Roth IRA can help you reduce MAGI and qualify for ACA subsidies.

Here is an example of how TGH and Roth Conversion Ladder could work together:

Let’s say you have $100,000 in a taxable brokerage account. You also have a traditional IRA with $50,000 in it.

You sell $10,000 of investments in your taxable brokerage account. This generates a capital gain of $2,000. You then reinvest the proceeds in a similar investment.

The capital gain of $2,000 is not taxed. It also does not count towards your MAGI.

You then convert $5,000 from your traditional IRA to a Roth IRA. The conversion is not taxed. However, it does count towards your MAGI.

By using TGH and Roth Conversion Ladder, you can reduce your MAGI by $7,000 ($2,000 + $5,000). This could make you eligible for ACA subsidies.

It is important to note that TGH and Roth Conversion Ladder are complex strategies. It is important to talk to a financial advisor before implementing either strategy.

Here are some additional tips for maximizing ACA subsidies:

Estimate your income accurately. When you apply for ACA subsidies, you will need to estimate your income for the year. If you overestimate your income, you could end up paying back some of the subsidies you receive.
Consider all of your income sources. When estimating your income, be sure to include all of your income sources, such as wages, salaries, self-employment income, and investment income.
Look for ways to reduce your MAGI. There are a number of ways to reduce your MAGI, such as contributing to a 401(k) or IRA, or deducting student loan interest.
Get help from a licensed agent. If you need help understanding ACA subsidies or implementing strategies to reduce your MAGI, talk to a licensed agent. A licensed agent can help you determine if you qualify for subsidies and can help you choose the right plan for your needs.

By following these tips, you can maximize your ACA subsidies and get the most out of your health insurance coverage.

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