Roth conversions and ACA

[Smilinggirl]

Hi everyone. I’ve been busy googling and planning to cut back my hours working (the stress is exacerbating some health issues), but wanted to get verification about Roth conversions and qualifying for ACA. Am I correct in saying that if I convert enough to put me above the Medicaid cutoff in my state (MD, which is approximately 18,200 per year), I can get subsidies for a silver plan through the program? What I’m thinking is if I work part time to make say 1k a month, I’d need to convert a little over 6k from tIRA to Roth to make more than the Medicaid qualification limit, then I’d pay 22% tax on roughly 8k of that. Does that sound right? Thank you for any input you can offer. Oh, and from what I’ve read, I should pay the conversion tax from personal savings rather than out of the IRA, right?

[disneysteve]

Yes, you should pay the tax on the conversion out of other savings, not out of the IRA funds.

As for ACA, the subsidy is based on your MAGI. Go to healthsherpa.com and plug in your estimated numbers and you'll see what plans are available in your area and how much they'll cost and what subsidy you should qualify for.

[Smilinggirl]

I used the MD health connection estimate tool as well as the KFF one, then just to be sure I spoke with a local ACA contact, so I’m sure about the 18,200ish. What I’m not sure about is that the conversion is counted the same as earned income. It looks that way from what I’ve read, but you all seem to know so much about all things finance, so I was hoping for confirmation on that point in particular. Thanks!

[disneysteve]

What I’m not sure about is that the conversion is counted the same as earned income.

Yes, the amount of Roth conversion counts the same as earned income toward your MAGI.

[Smilinggirl]

Thank you!