Have a Tax Question? Ask a Tax Expert
The 401k is considered taxable income. You must begin taking out when you turn 70 1/2 but any amount you take out is added to your income. You are only taxed on distributions (amounts you take out).
If your year end income exceeds 400% Federal Poverty Level (FPL), you will have to return the total amount of Advanced Premium Tax Credits you received.
The amount is limited to certain amounts insuring you can’t owe more than you can afford if you received too many Advanced Premium Tax Credits. Your income with the additional $6000 is still in the At least 200% FPLbut less than 300% for repayment.
You would be limited to $750 of pay back. If your alimony was cut that much then you are in a much lower income amount. That could mean no repayment of obama subsidy.
Still tax on your income that is left after exemption and deductions but no repayment.
Federal Poverty Levels (which are also called Federal Poverty Guidelines, Federal Poverty Line, or simply FPL) are used to see if you qualify for cost assistance when buying insurance through the State or Federal Health Insurance Marketplace.
If you make between 100% – 400% of the Federal Poverty Level you may qualify for premium tax credits on the Health Insurance Marketplace.
By that same thinking, if you report that you are on a lower level of income and receive assistance but when you file you have a higher income (like your 401k distribution) you have to pay some of that assistance back.
That is what happened to you last year.
You should be fine this year though.
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