2022 Year-End Planning Opportunities for Healthcare
December is finally here and Jae Oh, author of Maximize Your Medicare has some year-end planning opportunities with respect to your investment strategy and health insurance premiums.
One thing that people should be aware of is their year-end distributions because the degree that they might exist this year can affect your taxable income according to Oh. “[It’s a] ripple effect that can reach both your individual health insurance or your Medicare premium,” he says. “You do need to incorporate [your distributions] into your taxable income to try to take advantage of lower health insurance premiums or to avoid Medicare's IRMAA, for example.”
Another thing that readers should be aware of is the idea of tax loss harvesting. According to Investopedia.com, tax-loss harvesting is the timely selling of securities at a loss to offset the amount of capital gains tax due on the sale of other securities at a profit. Oh says that it's been a difficult year for financial markets, making tax-loss harvesting possible, so people should have the help of an accountant who knows the capital gains/losses rules. Tax-loss harvesting can help people buying individual health insurance have a lower tax bill.
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Oh also mentions the idea of an IRA contribution. Making a contribution after getting your distribution and before filing for taxes can further lower your taxable income. “If you had to get an estimate for every thousand dollars, for example, that you lowered your income, you get about 10% lower in health insurance premium. So a hundred dollars a year for a health insurance premium,” Oh says. “So this is not small in terms of what you can actually benefit from if you're paying attention and know how to take advantage of the rules as written.”
For those who have a 401(k) at work, they might be able to increase the amount of their contribution, but it may be tricky according to Oh. The Roth conversion needs to be handled differently because they’re a taxable event for that calendar year. It’s important to plan for how it will affect things like your taxable income, which then impact IRMAA under Medicare and health insurance premiums under the Affordable Care Act.
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