Understanding Capital Gains Impact on ACA Subsidies and 0% Tax Rate Eligibility

I'm trying to figure out this weird situation with our taxes for next year. My wife and I will likely have around $92,000 in W2 income for the year (both working regular jobs), and we're planning to sell some stocks I've held for over 5 years. Since we have a toddler now (family of 3), I understand we qualify for ACA subsidies as long as our AGI stays under $99,000. I'm also aware of the 0% long-term capital gains rate if our taxable income remains below $89,000 for married filing jointly. I'm confused about two things: 1. When calculating MAGI for ACA subsidies, do my long-term capital gains count toward that $99,000 threshold? If yes, does exceeding $99,000 mean we lose ALL subsidies immediately (a cliff), or do they gradually phase out? 2. For the 0% capital gains rate, am I right in thinking we'd pay 0% only on the portion that keeps our total income under $89,000, with anything above that taxed normally? Here's a basic example of what I'm trying to figure out: - W2 Income: $92,000 - Standard Deduction: $29,200 - Potential Long-Term Gains: $20,000 Would we pay no capital gains tax on this scenario? Or would some of it be taxable? And how would it affect our ACA subsidies? Really appreciate any help understanding this!

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21 comments

Liam Fitzgerald

•8M

Yes, long-term capital gains absolutely count in your MAGI calculation for ACA subsidies. MAGI includes pretty much all your income sources including capital gains, whether short or long term. For your first question: ACA subsidies don't have a complete cliff at $99,000 for a family of 3. They gradually phase out as your income increases, but there is eventually a point where you'd lose eligibility completely. The exact phase-out depends on your location, plan choice, and family size. For your second question: You've got the 0% capital gains rate concept mostly right. In 2025, the 0% rate applies to gains that keep your taxable income (including the gains themselves) below the $89,000 threshold for married filing jointly. Any gains that push you over that threshold will be taxed at 15% (or possibly 20% if you go high enough). For your example, let's break it down: - W2 Income: $92,000 - Standard Deduction: -$29,200 - Taxable Income before gains: $62,800 - Room left in 0% bracket: $89,000 - $62,800 = $26,200 So in your example, you could realize up to $26,200 in long-term gains at the 0% rate. If you took the full $20,000 in gains, it would all be at 0% rate. But remember, those gains would still count toward your MAGI for ACA subsidy calculations.

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Liam Fitzgerald

•8M

Yes, you've got it right! With W2 income of $87,000 and standard deduction bringing your taxable income to $58,000, you could realize about $31,000 in long-term gains without paying any capital gains tax because you're still under the $89,000 threshold for the 0% rate. However, for ACA subsidy purposes, your MAGI would indeed be around $118,000 ($87,000 + $31,000), which would put you over the subsidy eligibility threshold for a family of your size. So while you'd pay 0% on those capital gains, you would likely lose your ACA subsidies. This is one of those situations where tax planning becomes really important - figuring out whether the tax savings on the capital gains outweighs the lost ACA subsidies.

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Amara Nnamani

•8M

I went through this exact headache last tax season! I found this amazing tool called taxr.ai (https://taxr.ai) that helped me figure out the optimal amount of capital gains to realize without losing my ACA subsidies. You can upload your previous tax return and play with different scenarios to see exactly how much capital gains would push you over the edge for subsidies. I had a similar situation with about $94k in income and needing to sell some stocks. The tool showed me I could take about $4,800 in capital gains while keeping my subsidies, which saved me over $7,200 in healthcare premiums for the year. It also helped me calculate exactly where the 0% capital gains bracket ended for my specific situation.

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Amara Nnamani

•8M

Yes, taxr.ai does include state-specific tax calculations for all 50 states, including Minnesota. It factors in state-specific treatments of capital gains, which is especially helpful because Minnesota does tax capital gains at the same rate as ordinary income rather than giving them preferential treatment like the federal code does. Regarding security concerns, I was initially skeptical too. They use bank-level encryption (256-bit SSL), and they don't store your actual tax documents on their servers after analysis. They just extract the necessary information for calculations. They're also not connected directly to the ACA marketplace - instead, they use the official IRS and healthcare.gov formulas to calculate subsidy eligibility and amounts based on your location, family size, and income. I found their estimates were within $15 of what the actual marketplace quoted me.

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Fatima Al-Suwaidi

•8M

I just wanted to follow up here. I ended up trying taxr.ai after my initial skepticism, and wow - it actually helped a ton with my situation. I was planning to sell about $25k in stocks but didn't realize how badly that would affect my premium tax credit. The tool showed me I could strategically sell $11k this year and the rest next year to minimize my overall tax bill and keep most of my subsidies. It even factored in the partially phased-out subsidy rather than assuming a complete cliff. Saved me approximately $8,400 in healthcare costs and gave me a clear tax strategy I could understand without a pricey accountant consultation. Definitely more comprehensive than I expected.

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Dylan Cooper

•8M

If you're still struggling with getting clear answers about your ACA subsidy questions, I highly recommend using Claimyr (https://claimyr.com) to actually speak with someone at the healthcare marketplace directly. I wasted WEEKS trying to get through the normal phone lines before tax deadlines. Claimyr got me connected to an ACA specialist in under 15 minutes when the regular wait time was over 2 hours. The agent I spoke with explained exactly how my capital gains would impact my specific subsidy situation and confirmed I could still get partial subsidies even slightly above the threshold. You can see how it works here: https://youtu.be/_kiP6q8DX5c After waiting on hold for 3+ hours multiple times and getting disconnected, this was a lifesaver during tax season when I needed to make decisions about selling investments.

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Dylan Cooper

•8M

It's not hacking the phone system at all. They use a completely legitimate callback service that works with the ACA's existing phone system. Basically, they have automated systems that wait on hold for you and then call you when a representative is available. It's the same technology many large companies use for their own customer service. I was skeptical too, which is why I shared the video link so you can see how it actually works. I thought it might be some kind of scam initially, but it's just a service that navigates the phone tree and waits on hold in your place. I used it twice now - once for the ACA marketplace and once for the IRS when I had questions about reporting my capital gains correctly. Both times I got through when I had previously failed after multiple attempts on my own.

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StarSailor

•8M

I need to eat my words here. After posting my skeptical comment, I was desperate enough to try Claimyr for my ACA questions about capital gains affecting my subsidy. I got connected to an actual healthcare.gov specialist in 22 minutes (not quite 15, but pretty close). The agent confirmed what others said here - capital gains absolutely count toward MAGI for subsidy calculations, but there's a partial phase-out rather than a complete cliff at exactly $99K. In my case, I learned I could realize about $4K more in gains than I thought while still getting partial subsidies. This literally saved me thousands on healthcare costs while still letting me sell the investments I needed to. I've been trying to get this information for over a month through normal channels. Wish I hadn't been so skeptical initially.

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Dmitry Ivanov

•8M

Something important nobody mentioned yet - if you're close to the subsidy cliff, consider making a larger traditional IRA contribution to offset some of your capital gains! For 2025, you and your spouse can each contribute up to $7,000 ($8,000 if over 50) to traditional IRAs, which reduces your MAGI for ACA purposes. So if you need to realize $20K in capital gains but that puts you over the subsidy threshold, making max traditional IRA contributions could bring you back under while building retirement savings!

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Dmitry Ivanov

•8M

Yes, HSA contributions absolutely reduce your MAGI for ACA subsidy calculations too! For 2025, you can contribute up to $4,150 for self-only coverage or $8,300 for family coverage to an HSA (plus an extra $1,000 if you're 55+). These contributions directly reduce your MAGI. Between traditional IRA and HSA contributions, a married couple on a family high-deductible plan could potentially reduce their MAGI by over $22,000 ($7,000 × 2 for IRAs + $8,300 for family HSA), which gives you much more room to realize capital gains while keeping your subsidies. This is one of my favorite tax planning strategies for clients in your situation.

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Fatima Al-Maktoum

•5M

@Miguel Silva That s'a valid concern about potential tax law changes. While the 0% capital gains rate has been pretty stable, you re'right that nothing is guaranteed. However, major tax changes usually don t'happen overnight - they typically get announced well in advance and sometimes even have phase-in periods. One middle-ground approach might be to realize some gains this year while you know the rules, and keep some for next year. That way you re'not putting all your eggs in one basket timing-wise. You could also set up alerts for any proposed tax legislation that might affect capital gains rates so you can adjust your strategy if needed. The timing strategy @Ava Garcia mentioned is still solid for ACA purposes regardless of what happens to capital gains rates, since you d still'be managing your MAGI across different tax years.

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Keisha Johnson

•5M

One thing I'd add that hasn't been mentioned yet - if you're doing tax planning around capital gains and ACA subsidies, don't forget about the Net Investment Income Tax (NIIT). This is an additional 3.8% tax on investment income (including capital gains) that kicks in when your modified AGI exceeds $250,000 for married filing jointly. While it probably won't affect your specific situation with $92K in W2 income, it's worth keeping in mind for future years if your income grows. The NIIT uses a slightly different MAGI calculation than ACA subsidies, but capital gains still count toward it. Also, just a heads up - if you're planning to harvest any capital losses to offset gains, remember that capital losses can actually help you stay under the ACA subsidy thresholds too, since they reduce your overall capital gains that count toward MAGI. You can deduct up to $3,000 in net capital losses against ordinary income, with any excess carrying forward to future years.

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Harold Oh

•4M

This is really helpful information about the NIIT - I hadn't heard of that before! The capital loss harvesting tip is particularly interesting. So if I have some stocks that are down, I could potentially sell those at a loss to offset some of the gains from the stocks I want to sell, which would help keep my MAGI lower for ACA purposes? I'm nowhere near the $250K threshold for NIIT now, but it's good to know about for the future. Do you know if there are any other "hidden" taxes or thresholds related to investment income that people commonly overlook when doing this kind of tax planning?

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