Say you live in a (red) state that hasn't chosen to expand Medicaid under the ACA. Say your income is just low enough for Medicaid under the ACA, and thus too low to qualify for subsidies on the exchange (Say what? How did that happen?? Sigh). OK--you've been screwed by your spiteful Republican governor/legislature. What can you do about it? For some people, I believe there is a solution.
One thought is to lie. Inflate your expected income to qualify for a subsidized plan on the exchanges. This may not work out and come back to haunt you at tax time, when your actual income is reported. I'm not sure exactly how this will work, but you may be on the hook to repay the subsidies you received (need to do more research here).
However, what if you could adjust your income up a bit in a completely kosher fashion? Let's say you have a traditional IRA. You could convert some or all of that IRA to a Roth IRA in 2014 and your Adjusted Gross Income will increase by the amount of the conversion. You owe taxes (if any, considering your low income level overall) on the additional income. But if you are lucky enough to be in this position, voila, you have increased your taxable income for next year. Obviously, this scenario is only going to work for people who are:
A. Not too far below the income cutoff for subsidies, and/or
B. Have enough money in a traditional IRA (or 401k rollover, etc) to make this work.
If you are in this position, you should probably be converting your IRA to a Roth in any event, since your income taxes must be low at this point--pay them (if any) now and save that money tax free forever.
I hope this is helpful for someone. Here's hoping the states that have opted out of Medicaid expansion see the light going forward.
