AndyP
Level 2 Member
With the new health premium credit, you can achieve huge tax savings by making large traditional IRA/401k and HSA deductions.
For example, a family of 4 with income of 60,000 if they deduct 24,000 could increase their premium tax credit by $8,000+ and gain a retirement credit of $2000. Plus it saves $3600 on income taxes for a total return of $13,600. So the credits pay for a substantial portion of having to sock the money away in retirement accounts and HSAs. And provide a net worth increase of $13,600.
In my case I am deducting $8000 and saving an additional $3300, on top of the $700 credit I would get without deductions.
Even if your employer offers health insurance making you ineligible for the premium tax credit (PTC), I believe if you deduct enough it's possible to claim that your employer's insurance is "unaffordable." The calculation for whether employer insurance is "affordable" relies on AGI and IRA/401k deductions will lower your AGI. "Affordable" = the premium is 9.56% or less of AGI. I'm not a tax expert so I am not 100% sure on this. Please correct me if I'm wrong.
So for example an individual tax filer (0 dependents) who gets insurance through their employer may wish to consider declining this insurance, getting a plan on the federal exchange, and then deducting their income down to 18,000. They'd get insurance for almost free w/ a $1,500+ tax credit. In addition they would get a $1000 savers contribution credit. And they'd save 15% income tax. The effective tax rate for individuals making 35k or less is over 30% when you factor in the PTC and saver's credit. I believe this includes individuals on who are eligible for an employer plan because they should decline it. Again, I'm not an expert but that's what I'm doing I think.
For example, a family of 4 with income of 60,000 if they deduct 24,000 could increase their premium tax credit by $8,000+ and gain a retirement credit of $2000. Plus it saves $3600 on income taxes for a total return of $13,600. So the credits pay for a substantial portion of having to sock the money away in retirement accounts and HSAs. And provide a net worth increase of $13,600.
In my case I am deducting $8000 and saving an additional $3300, on top of the $700 credit I would get without deductions.
Even if your employer offers health insurance making you ineligible for the premium tax credit (PTC), I believe if you deduct enough it's possible to claim that your employer's insurance is "unaffordable." The calculation for whether employer insurance is "affordable" relies on AGI and IRA/401k deductions will lower your AGI. "Affordable" = the premium is 9.56% or less of AGI. I'm not a tax expert so I am not 100% sure on this. Please correct me if I'm wrong.
So for example an individual tax filer (0 dependents) who gets insurance through their employer may wish to consider declining this insurance, getting a plan on the federal exchange, and then deducting their income down to 18,000. They'd get insurance for almost free w/ a $1,500+ tax credit. In addition they would get a $1000 savers contribution credit. And they'd save 15% income tax. The effective tax rate for individuals making 35k or less is over 30% when you factor in the PTC and saver's credit. I believe this includes individuals on who are eligible for an employer plan because they should decline it. Again, I'm not an expert but that's what I'm doing I think.
Last edited: