Do Roth IRA distributions count as income when qualifying for affordable health care insurance?

by Timothy C. Hilbert, CPA | Oct 25, 2018
askacpaicon

Do Roth IRA distributions count as income when qualifying for affordable health care insurance?

It all depends on whether the Roth distribution is a “qualified distribution.”

Qualified distributions from Roth IRA accounts are excluded from income that counts toward obtaining a Marketplace (Affordable Care Act) health insurance policy and the ultimate cost to the insured.
  
To fall within the definition of a qualified distribution, the following must apply:

  • The Roth IRA distribution must be made after the five-year period beginning with the first taxable year for which a contribution was made to the Roth account set up for the taxpayer.
  • The distribution must be made after the date the beneficiary who set up the account turns 59 ½, or
  • The distribution is made because the beneficiary is disabled, or
  • The distribution is made to a beneficiary or to the estate after death of the person who set up the Roth account, or
  • The proceeds, not to exceed $10,000, are used to purchase a primary residence for a first-time homebuyer.

Distributions made that do not fall under the circumstances indicated above would count as income for purposes of obtaining a Marketplace health insurance policy. See IRS Publication 590-B or visit HealthCare.gov for more information.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Timothy C. Hilbert, CPA, is a director of audit and accounting and professional services industry group leader with Kreischer Miller in Horsham, Pa.

Disclaimer
The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
Financial FAQs

Search the most frequently asked finance and accounting questions and read the responses from PICPA members. Always consult a CPA before taking action.

Search