<p>There are all sorts of regulations pertaining to an investment that shows growth and when that growth may be taxable. </p>
<p>At its simplest, if you invest 100k and next year it is worth 110k- the growth may be taxable, whether or not you convert it to cash in hand. </p>
<p>If you sell the whole thing, only the added 10k is growth. The rest was your original investment. </p>
<p>After that, it gets complicated, but is readable in tax law. When you take out funds, there’s a rule for whether you are considered taking out profit (that growth) or principal. How long you held it can matter.</p>
<p>And Igloo I wasn’t asking for examples but for a citation (ie, link) that shows this has to be income-producing. So I can see your statement is accurate without having to look it up myself. There have been so many cases here where someone else has to do this legwork. If you are right, just cite it.</p>
<p>You could, but it would be pretty darn expensive to add enuf staff to audit. Realistically, the biggest potential fraud is those that have cash businesses and multiple sets of ‘books’. That has to be much broader than the millionaires living off of investment income -who would likely prefer to pay out-of-pocket to ‘keep the doctor’ that they ‘like’.</p>
<p>The Aspie kids parents should just buy him a policy rather than go through too many gyrations to get a subsidy. It can’t be too expensive at age 27.</p>
<p>^Oh, I see how the exclusion came about. Couldn’t they use medicaid/medicare office to verify? Or any other office who administer safety net programs?</p>
<p>LF, I don’t have a link. Some years ago, I looked into this in an unrelated matter and know it so. Do verify. I’d love it if I am wrong. I can pay my kid $6,000 to open a roth. God knows she works harder/better than anyone.</p>
<p>Igloo, you are right as to what Congress “could have” done – they could count assets. They chose not to.</p>
<p>They chose not to because they collectively decided that the public policy benefit of getting everyone insured outweighed the costs entailed in creating a mechanism to screen assets. That’s pretty much what happens in any complex law: a weighting of costs/benefits. </p>
<p>Of course they knew that some people would get subsidies that they don’t really need, but at some level they decided that was a preferable outcome than a system where many people who did need subsidies wouldn’t get them because of a more stringent screening and qualifying system. </p>
<p>It’s similar to the issues that come up again and again in the college financial aid system: there are ways that some people can “game” the system to qualify for benefits - but the laws are written to achieve a general overall policy goal, which is generally served by the structure they created.</p>
<p>Most likely you’re right, busdriver. Buy a policy and just pay the out-of-pocket for the prescription drugs? Certainly easier, very likely cheaper.</p>
<p>If there are long term goals of social security etc it makes sense for the kid to be employed. I have had a similar discussion in the past with someone about why they are paying a family member when considering the SS taxes may not need to be paid if they paid themselves instead (over SS income). They were just trying to complete the minimum number of years worked for SS/medicare eligibility since the member had completed several years of work elsewhere already.</p>
<p>Personally, I am tired of checking other’s suppositions and finding they are, shall we call it, misinterpretations. Or limited to some other circumstances than described. I’ve learned a great deal from this thread. Including that I understand some of this far better than I thought I did.</p>
<p>I’m also going to be pulling some “income” from growth.</p>
<p>Igloo, I think that maybe “some years ago” when you looked things up, you developed a mistaken impression that doesn’t apply to the situation at hand. </p>
<p>If your daughter is an adult, you have every right to hire her, but if you are paying her $6000, that either has to be reported on a W2 or a 1099. Either you have to withhold payroll taxes (W2), or she has to pay self-employment taxes (1099). And your daughter would be able to do whatever she wanted with her net earnings, including opening an IRA.</p>
<p>A person must have earned income equal to or in excess of the amount of the Roth contribution – so someone would have to earn $5500 in order to to contribute $5500 to a Roth. </p>
<p>I believe that payroll taxes and/or self-employment taxes are currently at 15.3%-- a parent can give their child $6000 tax free, but by hiring the child, if my number is correct, it would generate $918 of tax liability. </p>
<p>Mathematically I’m not sure if paying $918 up front in order to transfer money into a sheltered account is such a good idea. It might make more sense financially for the parent to invest the money in a tax-free bond fund instead.</p>
<p>^I agree unless there were some other strategic advantage (and work that needed to be done Here’s how I’d look at this:</p>
<p>Cost of BCBS Georgia 27 yr old plan - SILVER - $335 with $3500 DED and $4500 OOP Max</p>
<p>Net cost per anum: $4,020 premiums plus $4500 MAX OOP incl prescription = $8,520 – </p>
<p>Versus: $12,000 income paid as 1099 x - 13.5% SE tax ($1620) OR as W2 w/approx 6.2% surcharge paid in FICA (add $744 to parents’ remittance; plus subtract -$744 from kid).</p>
<p>So you’re paying $12,744 min, or giving away jointly about $13,620 instead buying what at worst would be about $8,520.</p>
<p>&^Calmom, I think your figure of 15.3 is accurate if state tax is included. I believe last year 1099/Self-employment tax was 13.5, but I might be mistaken. State and city tax did add another couple of percent, but in my example I was only using the FICA amounts ;)</p>
<p>But wait. The $8520 goes to health care providers and insurance companies, but a lot of the $12744 (some $10K or so) goes to the adult child. Would I rather pay $10K to my child and $2K to the IRS (round numbers here) or would I rather pay $8520 to someone else? I’d rather pay my kid!</p>
<p>At age 30, it would be $265 in my state, for a mid-silver. Rx is included at a small flat fee. CF, they’d need to check their state. Remember you are not paying the max OOP unless you use that much. You’d be giving the insurer $3200 plus Rx, some doc flat fees-- it depends and is ymmv.</p>
Here’s how I’d look at this:</p>