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Discrepancy between turbo tax recommendations for MAGI and Health insurance subsidies. Which is correct?

Forum|Forum|7 years ago
June 4, 2019
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Within Turbo Tax itself there is an "example recommendation" stating that contributions to an IRA can be used to reduce your income if your "estimated income" was below your actual income. Thus helping reduce (or prevent) having to repay health insurance subsidies back to the government.

ok,,, sounds good. but.

within Turbo Tax online help: https://ttlc.intuit.com/questions/3098329-where-do-i-find-my-magi it clearly shows that MAGI (used to determine subsidies for the ACC) does not allow you to deduct IRA contributions. If this is the case then contributing to an IRA will have no effect at all on the income amount used to determine your subsidy level.

So, which is correct? One of these two pieces of advice must be wrong as the are contradictory.

Best answer by dmertz

The tax code has many different modifications to AGI for different purposes. The MAGI for determining ACA Premium Tax Credits is a different calculation from the MAGI for determining if you are eligible for a deduction for a traditional IRA contribution. TurboTax calculates each of these independently and correctly.

If the MAGI for determining whether or not your traditional IRA is deductible results in at least some of your IRA contribution being deductible, the IRA deduction will reduce your AGI and will therefore reduce the MAGI for ACA purposes.

D

dmertzAnswer

Employee

The tax code has many different modifications to AGI for different purposes. The MAGI for determining ACA Premium Tax Credits is a different calculation from the MAGI for determining if you are eligible for a deduction for a traditional IRA contribution. TurboTax calculates each of these independently and correctly.

If the MAGI for determining whether or not your traditional IRA is deductible results in at least some of your IRA contribution being deductible, the IRA deduction will reduce your AGI and will therefore reduce the MAGI for ACA purposes.

T

TaxGuyBill

Employee

That link shows MAGI for purposes of IRA contributions, not for purposes of the Premium Tax Credit (credit for insurance through the Healthcare Marketplace).

If your Traditional IRA contribution is deductible, it *DOES* lower your MAGI for purposes of the Premium Tax Credit.