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.
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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.