Healthcare prem tax credit: i have some dividends which i believe count to household (hh) inc. does brokerage int expense reduce hh inc? how about investment gains/losses

[paul-j-heckman]

for total household income, it just seems like income should be offset by expenses/losses, in terms of qualifying for the healthcare tax credit, but it seems like it might be gross income (not including investment losses or interest expenses) which would be really strange treatment

[DoninGA]

Go to this healthcare.gov website for the types of income you are required to include on your application when applying for marketplace insurance - https://www.healthcare.gov/income-and-household-information/income/

[Mike9241]

it's modified AGI. so investment gains count. you are correct investment expenses are ignored as well as all other itemized deductions.  Weird? The tax code has thousands of weird rules. 

[paul-j-heckman]

that is really weird!  so investment losses don't even count against/offset gains?

[Critter-3]

The NET sch D amount is used ... so the gains and losses are first netted before becoming part of the AGI for this use. 

[paul-j-heckman]

ok understood.  but an "ordinary expense" like an interest expense (broker margin interest paid) cannot net off with ordinary income (like dividend income)

is that correct?

[paul-j-heckman]

mind advising on the below when you have a second?  Just a quick follow up.  I really appreciate it!:

"ok understood.  but an "ordinary expense" like an interest expense (broker margin interest paid) cannot net off with ordinary income (like dividend income)"

is that correct?

[Mike9241]

the applicable limit is household income which is based on Modified Adjusted Gross Income.  There are no itemized deductions that affect MAGI so margin interest will not reduce household income. In addition, many investment expenses are no longer deductible - like account fees 

[paul-j-heckman]

hmmm that's interesting, the turbotax outline/primer says it is (as of October 16, 2021 update):

"You can only take a deduction for investment interest expenses that is lesser than or equal to your net investment income. For example, if you have $3,000 in margin interest but net investment income of only $1,000, you can only deduct the $1,000 in investment interest in the current year."

[Critter-3]

Sorry ... I had a mind fart ... I thought it went to the section of the Sch A that was removed ...  the allowed portion goes on line 9 of the Sch A and the rest is carried forward on the form 4952.  Read the form with instructions (scroll down) here :  https://turbotax.intuit.com/tax-tips/investments-and-taxes/what-is-form-4952-investment-interest-exp...

You were referring to this article explaining the limits ... you can choose to have some cap gains treated as ordinary income to use more of the credit if you wish otherwise the unused portion is carried forward.   Of course this all assumes you can even itemize deductions at all ... not everyone can anymore. 

https://turbotax.intuit.com/tax-tips/investments-and-taxes/what-is-form-4952-investment-interest-exp...

[paul-j-heckman]

ok so margin interest isn't included in MAGI, but on the other side are dividends?  Presumably dividends are included

[paul-j-heckman]

who can't itemize deductions "anymore"?

[DoninGA]

---

@paul-j-heckman wrote:

who can't itemize deductions "anymore"?

---

You can enter itemized deductions in the section Deductions & Credits using the TurboTax program under Federal taxes.

The total of all your itemized deductions on Schedule A must be greater than the standard deduction for your filing status to have any tax benefit.

Standard deductions for 2021

• Single - $12,550 add $1,700 if age 65 or older
• Married Filing Separately - $12,550 add $1,350 if age 65 or older
• Married Filing Jointly - $25,100 add $1,350 for each spouse age 65 or older
• Head of Household - $18,800 add $1,700 if age 65 or older

[Mike9241]

correct dividends are included in MAGI even tax-exempt interest dividends such as those paid by muni bind funds or ETFs