Trying to understand the ACA income reporting procedure

[BlueStreak]

11. You aren't taxed twice

I know it is a cop-out, but this really is a question for an accountant. An annuity is not a savings account. It is more like life insurance except that it pays while you are alive. My guess is that a portion of the benefit is taxable even if the original source of the funds is post-tax. Basically if you have to report that as income on your tax return, it will count as income for your subsidy calculation.

People in early retirement often have the exact opposite income problem from most others. You may not have ENOUGH income (according to your tax return) to get up to the level where you can get a subsidy. That's about $16,500 for two people in my situation. If that is an issue and you have some pre-tax funds, you can plan to realize the tax on some of those funds during 2014 to dial in the "right" amount of income. One way to do that is to convert standard 401K money to a Roth plan, if that applies to you.

Of course, if you are already taking Social Security payments, then you should have enough income to get into the subsidy range, and then the issue is not having too much income to get a subsidy (> $62,000 in my case).