[kxyvr]

This is false and will likely get you into trouble. ACA uses your last year's income tax return in order to determine whether a subsidy should be awarded. While it is true that you do not send in your tax return while applying for coverage, your insurance company does send in paperwork through a 1095-A. In the past, 1095-A was used primarily to show that coverage was carried in order to avoid a tax penalty, so, yes, you may be able to get away with it, but you'd still be lying and there will be documentation that you are lying.

Also, sole-proprietorships and S-corps, LLC or not, are considered pass through and all company income is considered personal income as far as the IRS is concerned. There's no such thing as not paying yourself in this context to drive down your income.

[jjeaff]

There is nothing false about his comment (maybe it was updated).

ACA is fully based on projected income for the year. Previous year's tax returns are one way of substantiating your projected income. But not required. If you are living off of savings and not making a profit yet on your business, you can pay yourself a small salary and qualify for full subsidies from ACA.

If you file as a C Corp (which you can do with an LLC), you could even hold profits in retained earnings and not pay them to yourself yet. You would of course have to pay corporate tax on those retained earnings.

[kxyvr]

Yes, ACA is based on projected income:

https://www.healthcare.gov/income-and-household-information/...

However, for most people, the primary number to estimate this is your adjusted gross income, which they explicitly instruct to use line 7 on the 1040. It's not entirely clear to me who the regulatory authority is now that the tax penalty has been taken away for not carrying insurance, but I'm pretty sure it's going to look bad if you say that your income is near $0 to get a subsidized plan and your actual income is above the subsidy level and the IRS will have this information.

As far as holding the money in a C-corp, sure. However, then you're going to pay the corporate income tax rate for keeping the money in C-corp, file much more complicated paperwork than you would as a sole-proprietorship (depending on the state), and then likely have to pay additional taxes or play games once that money turns into income. All of this is to save on what's going to turn out to be likely less than $5k in premiums, which are already tax deductible as a self-employed person.

I'll still contend that the comment is largely false given the idea is to save money by pretending that there's no income. The IRS isn't dumb and they'll get their taxes eventually even if it requires an audit. It seems like a huge hassle and liability to play this game to save such a small amount of money. If this isn't a small amount of money, then the OP isn't in a position to start a business, unfortunately.

[nutjob2]

I don't know why you latched on to the notion that I was suggesting something dishonest.

You might be prioritizing developing your product over making income, or reinvesting income rather than spending that income personally. Or you might have savings or existing investment funding. There are many common scenarios such as these and none of them involve fraud.

You can be building up a substantial asset and living frugally and it doesn't affect your eligibility because of the lack of an asset test and because any capital gains are not realized) or assessed) until the business is sold.

Also as a single person you can earn up about $12K and not pay any premiums under Obamacare, or get up to about $48K and still get a subsidy. If you have a family of 4 these figures and $23K and $96K respectively. So obviously you don't have to get your income down to $0.

[jjeaff]

Those minimum/maximum rates are different depending on if you state has medicaid expansion or not.

But I think the rates you posted are federal poverty level for a family of 4. Obamacare coverage kicks in at 138% of FPL all the way up to 400% of fpl.

Below 138% FPL disqualifies you for obamacare because you would qualify for state medicaid coverage.

[jjeaff]

He didn't imply you should lie about your income.

Most early businesses don't make much profit if any. Mine did not and so we kept our income right in the sweet spot to get max subsidies.

We paid ourselves that small salary and plowed every bit of the remainder into growing the business. In other words, there was no profit at the end of the year.

We had absolutely excellent coverage for around $100 a month total for a family of two. In one year we had $70,000 in expenses from a broken ankle that needed major surgery. And the next year a complicated pregnancy that cost $40k. We paid our max out of pocket those two years of $1500 each year.

[anaisbetts]

I'm not 100% sure, but afaik this is true in some states if you are living off of capital gains - I've seen people on the FIRE forums saying, "I feel actually bad taking advantage of subsidized healthcare, but because state law is written poorly and only considering wages, I am being opted in". In CA this loophole is not a thing, and capital gains are considered as part of your income for insurance purposes.