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Home > Why the healthcare subsidy may be a disincentive for me to work harder

Why the healthcare subsidy may be a disincentive for me to work harder

January 4th, 2014 at 06:12 am

I reported my financial intentions here for the New Year, so figured I might as well report that I followed through: I did contribute $6500 to a traditional IRA, my 2014 contribution. (It was a simple transfer of taxable savings to the IRA.) I also contributed $800 to retirement savings in my new Barclay's Dream account. This came from checking, and left me with just about $1500 to pay ongoing bills, but I think I can make it til a few more pay days bulk up my checking again.

I made the contribution to my traditional IRA on the advice of my healthcare "navigator" because doing so would reduce my 2014 modified adjusted gross income enough to hopefully ensure my income remains low enough so I can indeed qualify for the healthcare subsidy. When I calculated my projected income for 2014, I was right on the subsidy cut-off border (around $46k) and could easily go above or below that by a few thousand. Making that IRA contribution, something I'd be doing anyway (although normally to a Roth) also helps ensure my income falls below $46K.

So thinking along the same vein, I've been waffling about whether I should take on any freelance writing this year. I never make that much, especially working f/t. Typically, it comes to about $5,000 gross and the net is probably around $4,000, so if doing that freelance work jeopardizes my healthcare subsidy ($300 someething a month), I don't think it's worth it.

On the other hand, if my current contract job does indeed end in July as it's supposed to, with no extensions, then I will very much be wanting to do that freelance work. So I don't want to turn away my 2 chief clients now, or make them feel I'm unreliable, if I may need that work later.

It's a little bit of a dilemma. I may do up to $600 worth of work for both clients (they won't issue a 1099 if it's under $600) and after that tell them things are getting very busy with my f/t job and I need to take a break from the freelance, but then remind them the contract job ends in July and I'm available after that.

In July, if I find out the contract job will continue, then even an extra 2 months' income will cause my annual income to increase enough so that I'd lose the subsidy anyway, so then I might as well do the freelance work too. (One thing I'm unsure of is, if the contract job is extended and I report my now higher expected annual income on my state's healthcare website, I know I'll lose the subsidy but would I then also be required to PAY BACK the subsidy I'd gotten thus far? It would seem unfair to require that since it's not like I'm intentionally under-reporting my income, and I had no way of knowing beforehand whether my contract would be extended or not.)

If I find out in July that the contract job will indeed end, then I'll definitely be wanting to do the freelance work for the rest of the year (although you can bet I'll be carefully tracking all income YTD, just to be sure. So either way, I think I'd be able to do the freelance, but only after July.

The reason why I don't think I should do the freelance work from now until July is because I could be cutting it very close, and not doing any freelance until I have a better handle on my contract job status would seem to give me some assurance I wouldn't risk exceeding $46K.

Can't remember the exact monthly amount of the subsidy, but I think it's around $350 a month. That's $4200 a year, which is around what my freelance work usually grosses. So it would hardly seem worth it to do the freelance at all. Since I only have time to do the freelance work on weekends, it would certainly free up a lot of personal time I've sacrificed for a little extra money.

As an added step, knowing I would be using taxable mutual funds to fund my 2014 traditional IRA contribution, I made sure I sold those mutual funds in December (last month), so any cap gains from the sale (which are viewed as income) would be reported on this year's tax return, not next year's.

Sound confusing? It is! All because the uncertain status of my contract job makes planning everything else very difficult.

Feedback welcome!

8 Responses to “Why the healthcare subsidy may be a disincentive for me to work harder”

  1. creditcardfree Says:

    First let me say, I'm glad you now have affordable insurance. And I do think your plan to do $600 worth of work for your clients until you know your contract job is sound.

    And my next comment isn't directed at you. I find it sad that government benefits which are meant to help, and do, can also change human behavior to work less, and be less productive...to give less of our talents and gifts to the world.

  2. PatientSaver Says:

    I agree, I really do.

  3. creditcardfree Says:


  4. scfr Says:

    Well said, ccf

  5. Joan.of.the.Arch Says:

    My DH and I have a lot of things to balance in the decisions about insurance, too. I have a response in the forums detailing that ACA gold insurance would save us $9700/year, yet we are deciding against it for this year.

    Aside from the earnings, if one of your issues is needing to have ongoing current references & portfolio content, perhaps you could consider offering writing to a charity. That way you'd definitely use those talents for good, not jeopardize your insurance, and have up-to-date professional experience.

  6. CB in the City Says:

    I think your plan is sound. And it will be a nice break for you, too. Free-lancing on top of full-time employment has to be exhausting.

  7. PatientSaver Says:

    I'm not the first person to realize the disincentive to work:

    That's a good idea, Joan of the Arch, but I have plenty of writing samples.

    CB, yes, I wouldn't mind taking a breather from the freelance on weekends stuff. It's just all work, no play.

  8. creditcardfree Says:

    @PS, no you are not the first. Political parties opposed to the health care law have said this very thing for years.

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