Roth IRA's are paid with after tax dollars. This means that the ROTH IRA IS included in your AGI. Since the Marketplace uses your MAGI which starts with your AGI and adds in other non-taxable income, and the IRS uses your MAGI to determine your Premium tax credit, contributing to a ROTH IRA will NOT put you in a better position for the premium tax credit. This is because the ROTH contribution has absolutely NO affect on your AGI.
See below from the IRS on ROTH contributions NOT being deductible from your return as they are not reported on your return and also how the marketplace calculates your credit.
When you say last year it worked just fine, it may simply be that last year your income was slightly lower, and just enough to allow for the credit.
A Roth IRA differs from a traditional IRA in several ways. Contributions to a Roth IRA aren't deduct...
MAGI doesn't appear as a line on your tax return. To figure out your MAGI:
- Start with your adjusted gross income (AGI). This is the figure on IRS Form 1040, line 11 of your fe...
- Take your adjusted gross income amount and add any untaxed foreign income, non-taxable Social Securi...
How to estimate your expected income
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