10 Updates

How To Bilk Obamacare

May 18 2014, 12:48am CDT | by

The Affordable Care Act (ACA) provides subsidies to Americans making up to 400 percent of the poverty level, about $94,200 for a family of four. A study by Families USA suggests that 71% of those...

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10 weeks ago

How To Bilk Obamacare

May 18 2014, 12:48am CDT | by

The Affordable Care Act (ACA) provides subsidies to Americans making up to 400 percent of the poverty level, about $94,200 for a family of four. A study by Families USA suggests that 71% of those in the individual market will be eligible for a subsidy.

Rather than limiting subsidies to only those people with a small net worth, the ACA provides aid to all people with low incomes, including those early or partial retirees.

Imagine a couple, Michael and Lisa, who are both 51 years old and own a family business. They have two children, 17-year-old Jacob and 14-year-old Emily. Last year their business produced income of about $140,000. They have lived well below their means, saving and investing diligently. They could retire at any time and live comfortably.

Until now, they were individually insured, but their health care policy costs are rising even more than the average 41%.

The most drastic option for Michael and Lisa would be to get divorced, leaving one of them with the business and the income and the other with the children. The ACA heavily discriminates against married couples in favor of single parents. A family of three with a very low or nonexistent income would receive maximum federal subsidies.

Early retirement is a simpler option for them: sell the business, pocket the money, and have little or no income. And, with the ACA in effect, early retirement is an easy decision for Michael and Lisa to receive subsidies for their otherwise expensive midlife care.

However, with a little tax planning , Michael and Lisa won’t need to retire early or become divorced in order to receive health insurance aid. They could receive the subsidy and keep their business.

Imagine that Michael and Lisa each pay themselves $33,000 in wages. In 2014, they can each contribute $17,500 to the company’s 401(k) and, because they are over 50, an additional $5,500 of catch-up contribution.

Because of their contribution, the business can add to their 401(k) an additional 25% of their salary as a profit-sharing bonus or employer match at the end of the year. Via this match, they each gain an extra $8,250 that is untaxed.

All these 401(k) contributions leave them each with a $10,000 paycheck.

Under Obamacare, household income is based on modified adjusted gross income (MAGI). MAGI includes IRA distributions, but there are deductions that can lessen it: certain contributions to retirement plans, alimony, moving expenses, and self-employment expenses.

In 2014 , Michael and Lisa can each contribute $5,500 to a Roth IRA plus an additional $1,000 catch-up provision. Although these IRA contributions do not reduce their MAGI, since money in a Roth will never be taxed again, any interest and dividends in future years will not spoil the scheme and inflate their income.

Because they run a family business, their children can earn incomes as well. At 17 and 14 years old, Jacob and Emily are both considered of working age for nonhazardous jobs. They could each be paid $23,000 and put $17,500 of it in the company’s 401(k). The company will contribute an additional $5,750 in match and profit sharing.

This leaves each teenager with a $5,500 paycheck, which is perfect for funding their Roth IRA. Contributing to a Roth between ages 14 and 20 is better than starting at age 21 and contributing for the rest of their lives .

Using this plan, the family has put a total of $109,000 into the company 401(k), $24,000 into Roth IRAs, and now has a taxable income of only $31,000.

With this MAGI, the family of four would be at 132% of the poverty level. This qualifies them for the maximum ACA benefit, requiring them to pay just 2% of their income for a health care premium. The cost of a Silver plan, normally $10,825 (34% of their MAGI), would cost them only $600 per year.

If their business was more profitable, they could change their corporate structure to a C Corp and keep excess income in the business so it would not jeopardize their government subsidies./>/>

The great complexity of the tax code offers a great opportunity for tax planning. Even if you have large savings, keeping your income low may open the door to having your health insurance subsidized.

Also, if you try this MAGI-lowering technique, you may be able to take advantage of many other federal or local benefits.

Megan Russell contributed to this article.

 
Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakyat was told today ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was broken into ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Rakyat t ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk Seri Hishammu ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Selatan’ in the southern states ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Min ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involving an alloc ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan Bazaar ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansar ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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