Affordable Care Act, Roth Conversion and Taxes

Pingo

Hello,

I haven't worked this year and plan to do a Roth conversion from my 401k traditional IRA which has pre-tax money from my previous job, into my roth retirement account for 2023. I understand this constitutes taxable income for my AGI and should count for ACA eligibility.

1. Can you please confirm that a Roth conversion qualifies for ACA premium tax credit eligibility?
2. I have a carryover loss from past losses on capital gains. Can you please shed some light if the ACA income takes into account the losses? I.e., if my Roth conversion is for $17k, assuming no other income, and I have the annual max of $3k carryover loss in my tax return, plus standard deduction for a single filer, what number would ACA look at to determine eligibility? Is it the $17k, or $14k after the carryover loss? I believe the standard deduction is not accounted for, for the IRS's ACA eligibility based on my research so it won't drop down due to the standard deduction (please feel free to confirm).
3. I intend to do another Roth conversion for 2024, but am hoping to have a job and may become ineligible for ACA's premium credits. Can you please confirm that I can still apply, and get the credit for the months that I have $0 income, and then simply cancel ACA and get on my employer's health care plans when I get a job? I want to confirm that I will not have to pay for the premium or have any penalties for doing this.

Thank you dearly, this will help me tremendously!

Pingo

MatthewD

Hi Pingo,

1. Yes, if that conversion increases your AGI, then it can and will impact the ACA premium tax credit (PTC).
2. Yes, the losses will also impact your AGI, and can impact the ACA calcs.
3. The ACA PTC is based on your yearly income, and so any PTC can be impacted.

The bottom line is you cannot avoid paying back a premium tax credit, if your income reaches a certain level for the year.

For details read more about the PTC here.