Millions of Americans who buy health insurance through the Affordable Care Act marketplace will face staggering premium increases in 2026 if enhanced subsidies expire on Dec. 31. Although Congress discussed extending the subsidies during the recent government shutdown, negotiations have hit a wall, leaving millions in limbo. The return of the so-called “subsidy cliff” means anyone earning an income that exceeds 400% of the federal poverty level — $62,600 for individuals or $128,600 for a family of four — ...

SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below. Imagine you’re 65 with $1.2 million in an IRA and a lingering question: should you convert your account into a Roth IRA? The answer may depend on how you go about it. A Roth conversion can provide some sizable advantages, including tax-free withdrawals and freedom from mandated distributions – but that doesn’t mean it’s always the right move. While there’s no prohibition or disadvantage to a Roth convers ...

Core Points - The One Big Beautiful Bill Act (OBBBA) signed by President Donald Trump includes several provisions that can positively impact personal finances [1] Group 1: Child Tax Credit - The Child Tax Credit (CTC) allows parents to claim up to $2,200 per child under 17, with up to $1,700 being refundable even if no federal income tax is owed [2] - The credit begins to phase out at a modified adjusted gross income (MAGI) of $200,000 for single filers and $400,000 for married couples filing jointly [3] Group 2: Auto Loan Interest Deduction - For the first time, individuals can deduct up to $10,000 per year in auto loan interest for cars assembled in the U.S., provided the loan is in the individual's name [4] - This benefit is available until 2028, emphasizing the importance of ensuring the vehicle qualifies [5] Group 3: Small Business Benefits - Small business owners can write off 100% of the cost of qualified business property in the year of purchase, applicable to items like computers and office equipment [6] - This deduction is now permanent, providing immediate financial benefits for businesses [6] Group 4: Qualified Business Income Deduction - Business owners may deduct up to 20% of their qualified business income, with full deductions available for incomes under $197,300 for single filers and $394,600 for married couples filing jointly [7] - The deduction phases out for incomes exceeding $247,300 for single filers and $494,600 for joint filers [7]

Core Insights - Medicare premiums for Parts B and D can increase based on household income, specifically through the Income-Related Monthly Adjustment Amount (IRMAA) [6][20] - The IRMAA is applied annually and is determined by a two-year lookback period of income [10][14] Medicare Parts Overview - Medicare Part A covers hospital treatment and most people do not pay a premium for it, unless based on work history [4] - Medicare Part B covers outpatient treatment and has a base premium of $185 per month starting in 2025, which is adjusted based on income [2][8] - Medicare Part C is a public/private partnership that allows Medicare coverage to help pay for private insurance, typically requiring monthly premiums [3] - Medicare Part D primarily covers prescription medicine and also has a premium that varies by plan and can be adjusted based on income [1][9] IRMAA Details - For 2025, Part B IRMAAs start at incomes above $106,000 for individuals and $212,000 for joint filers, with premiums increasing to as high as $628.90 for incomes above $500,000 [8] - Part D IRMAAs also begin at the same income thresholds, with additional monthly charges ranging from $12.90 to $81 depending on income levels [9] Income Considerations - Medicare premium adjustments are based on Modified Adjusted Gross Income (MAGI), which includes adjusted gross income plus tax-exempt interest [7] - Withdrawals from retirement accounts can affect future Medicare premiums, but the impact is not immediate due to the two-year lookback rule [15][18] - Managing income and withdrawals can help mitigate premium increases in subsequent years [19]

Core Insights - Medicare consists of four main parts: A, B, C, and D, each covering different services and having distinct cost structures [4][10][27] - Premiums for Medicare programs can vary based on income, with a system called Income Related Monthly Adjustment Amount (IRMAA) determining the costs [2][15][27] - A Roth conversion can significantly impact Medicare premiums due to the increase in taxable income, leading to higher costs for at least a short period [5][24][27] Summary by Category Medicare Parts and Premiums - Medicare Part A is generally free for most Americans who have paid Medicare taxes for at least 10 years, but it does have deductibles and copayments [1] - Medicare Part B has a standard premium of $185 per month, which is income-adjusted, meaning higher incomes lead to higher premiums [7][8] - Medicare Part C, or Medicare Advantage, does not have a fixed premium schedule and is based on private health insurance plans that bundle Parts A and B [8][9] - Medicare Part D has variable premiums that can increase based on income, and enrollment is not mandatory to receive coverage from other parts of Medicare [10][11] Income and Premium Adjustments - Medicare premiums are based on modified adjusted gross income (MAGI), which includes taxable income and certain tax-exempt income [15][17] - The premium structure operates on a two-year lookback, meaning current premiums are based on income from two years prior [16][17] - A sudden increase in income, such as from a Roth conversion, can lead to a spike in premiums two years later [18][20] Roth Conversions and Their Effects - A Roth conversion can raise Medicare premiums temporarily due to the increase in taxable income, but future withdrawals from a Roth IRA do not count toward income, potentially lowering long-term costs [24][27] - For example, converting $500,000 from a 401(k) to a Roth IRA can lead to significant increases in Medicare costs during the conversion period, with an estimated additional cost of $21,174 over five years [26][27] - Financial advisors can assist in structuring Roth conversions to manage both taxes and Medicare costs effectively [5][30]

Core Insights - The individual is facing a higher tax bracket and increased Medicare premiums due to a significant withdrawal from their Thrift Savings Plan (TSP) [1][2] - The increase in Medicare premiums is not permanent and is based on income from two years prior [2][4] Tax and Withdrawal Strategy - There are still opportunities to adjust withdrawal strategies to potentially reduce tax burdens and Medicare premiums [2][3] - The income-related monthly adjustment amount (IRMAA) applies to Medicare premiums for individuals whose income exceeds certain thresholds [3][4] - For 2024, IRMAA thresholds are set at $103,000 for single filers and $206,000 for couples, with potential premiums reaching up to $594 per month [4] Income Considerations - The IRMAA is calculated based on income from two years prior, meaning 2024 IRMAA will be based on 2022 income [4] - Inflation adjustments to IRMAA brackets may affect future premium calculations, potentially alleviating the surcharge for those whose income is slightly above the threshold [5] - Different measures of income, such as taxable income and modified adjusted gross income (MAGI), determine tax liabilities and Medicare costs [8]

Core Insights - Investors must begin taking required minimum distributions (RMDs) from tax-deferred accounts at age 73 or 75, depending on their birth year, which can result in significant cash that may not be needed for living expenses [1][2] - A Roth IRA is suggested as a suitable option for reinvesting unneeded RMD cash due to its tax-free withdrawals and exemption from RMDs during the account holder's lifetime [1] Group 1: RMDs and Roth IRA Contributions - Direct conversion of RMDs to a Roth IRA is not allowed, but individuals can contribute to a Roth IRA if they have sufficient earned income, with a contribution limit of $7,000 plus an additional $1,000 for those aged 50 and above for 2024 [2] - Earned income includes wages, commissions, bonuses, and self-employment income, while it excludes pension payments, interest, dividends, rental income, and other non-qualifying sources [3] Group 2: Income Limits and Withdrawal Rules - Roth IRA contributions are subject to income limits, with phase-out starting at a modified adjusted gross income (MAGI) of $146,000 for single filers and $230,000 for joint filers, becoming ineligible after $161,000 and $240,000 respectively [4] - A five-year waiting period is required after the first contribution to a Roth account before withdrawals can be made, and heirs must withdraw the entire balance within 10 years [5] Group 3: Alternatives to Roth Contributions - For those unable to contribute to a Roth IRA, options exist to eliminate, reduce, or delay RMDs, including converting an IRA to a Roth account after taking the RMD for the year, with taxes applicable on the converted amount [6]