Just to get another issue on the table: there was no extension of the ACA expanded subsidies. The implication is that the 400% FPL “subsidy cliff” will return in 2026.
Currently you can earn >4x FPL and still get an premium subsidy. Next year you won’t.
Might be a bit early to change Pralana since I’m not sure we know the exact subsidy formula yet. (Most presume it will go back to the formula before the TJIA.)
But this will be an important part of Pralana to update, especially given aca subsidies affect roth conversions.
@jkandell This is a very good point. I found your post as I was searching the forum for why PRC is showing me blowing past 400% FPL in several post-2025 years but still getting a subsidy. It seems very unlikely that the enhanced subsidies would be extended past 2025 as they were not in the OBBB Act and will automatically sunset absent further action from Congress. As it stands right now, I'm not confident in the Roth Optimizer results, as PRC appears to reflect ACA subsidies that I don't expect will be available. A toggle button similar to the TCJA one would be great, but I'm not sure it would be worth implementing less than half a year from the expiration.
As it stands right now, I'm not confident in the Roth Optimizer results, as PRC appears to reflect ACA subsidies that I don't expect will be available. A toggle button similar to the TCJA one would be great, but I'm not sure it would be worth implementing less than half a year from the expiration.
What I've done as a work-around is to set the limit within the Roth optimizer parameters for years 2026 to n to the "FPL 4x" setting for the years I expect to be on ACA. This will keep conversions within the new law, i.e. at or below 400%. 2025 I leave at "unlimited" of course. You might need to adjust the years a bit once you see where Pralana will recommend taking the premiums. This isn't a perfect solution since the formula for calculating the premium subsidy in 2017 was slightly different from the one that is used now and we don't know what it will be in 2026--but it is close enough IMO till they update things.
What I've done as a work-around is to set the limit within the Roth optimizer parameters for years 2026 to n to the "FPL 4x" setting for the years I expect to be on ACA. This will keep conversions within the new law, i.e. at or below 400%. 2025 I leave at "unlimited" of course. You might need to adjust the years a bit once you see where Pralana will recommend taking the premiums. This isn't a perfect solution since the formula for calculating the premium subsidy in 2017 was slightly different from the one that is used now and we don't know what it will be in 2026--but it is close enough IMO till they update things.
I actually did the same exact thing, but for years 2028-2032 the calculator is showing me above FPL 4x before any Roth conversions, and the optimizer is not recommending any conversions in those years. Yet when I review healthcare expenses, it shows me getting a subsidy in every one of those years. I presume this means that the current version of PRC Online assumes the enhanced subsidies with no cliff will continue past 2025. I guess my subsidies for those years are overstated by similar amounts in both my "no Roth conversions" and "optimized Roth conversions" scenarios, so at least it's a largely apples to apples comparison.
I actually did the same exact thing, but for years 2028-2032 the calculator is showing me above FPL 4x before any Roth conversions, and the optimizer is not recommending any conversions in those years. Yet when I review healthcare expenses, it shows me getting a subsidy in every one of those years.
If you're right I guess we're just gonna have to wait till they get around to changing it. I'm sure you considered--having seen the lack of conversions--then changing the settings on Build>Scenario>Scenario Assumptions>Tax Assumptions so that TCJA will not go past 2026--that would fix the ACA issue but mess up the tax brackets. (Then again, congress might be forced to raise taxes due to critical national debt.) There might be some way to fiddle with scheduled transfers, but I don't have the patience for that.
I guess we're just going to have to wait.
If you're right I guess we're just gonna have to wait till they get around to changing it. I'm sure you considered--having seen the lack of conversions--then changing the settings on Build>Scenario>Scenario Assumptions>Tax Assumptions so that TCJA will not go past 2026--that would fix the ACA issue but mess up the tax brackets. (Then again, congress might be forced to raise taxes due to critical national debt.) There might be some way to fiddle with scheduled transfers, but I don't have the patience for that.
I guess we're just going to have to wait.
Does the TCJA setting really have any effect on ACA subsidies in the model? I would not have guessed that, as the enhanced ACA subsidies were not part of TCJA, but were originally established in the ARPA law in 2021. I suppose they could be tied together in the model since they both were set to expire in 2025, but I can't find anything in the manual to that effect. Not that it matters much to me, as at this point in my analysis I'd rather use enacted tax rates than speculate on future changes.
Wow, ACA reversion already changed! Build>Scenario>Tax Assumptions>Federal Tax Law Settings!
I actually did the same exact thing, but for years 2028-2032 the calculator is showing me above FPL 4x before any Roth conversions, and the optimizer is not recommending any conversions in those years. Yet when I review healthcare expenses, it shows me getting a subsidy in every one of those years.
If you're right I guess we're just gonna have to wait till they get around to changing it.
Wow, ACA reversion already changed! Build>Scenario>Tax Assumptions>Federal Tax Law Settings!
Nice! As a new user I am already impressed by how quickly the Pralana team addresses issues.
I also wish to convey my gratitude and admiration for this prompt update. It was not urgent for my needs, but I regularly appreciate how truly nerdy this product is (a compliment!)
How the $6,000 Senior Tax deduction works from Kiplinger dated July 18th, 2025:
Question: I am retired and receive monthly Social Security benefits. I heard that the newly enacted so-called “One Big Beautiful Bill” (OBBB) eliminates federal income tax on Social Security benefits. Is that accurate?
Joy Taylor: No, the OBBB doesn’t make Social Security benefits fully tax-free. Many Social Security recipients now pay federal income tax on up to 85% of their benefits, depending on their provisional income. President Trump promised to end the tax. But the process that Republican lawmakers used to pass the OBBB while circumventing the 60-vote filibuster rule in the Senate didn’t allow this income tax change to Social Security benefits. So lawmakers found an alternative means of tax relief for seniors in the OBBB.
There is now a new senior tax deduction of $6,000 per filer age 65 and older. Married couples with both spouses 65 and older can deduct $12,000 on a joint return. This deduction is available to taxpayers who claim the standard deduction and to those who itemize on Schedule A of the Form 1040 or 1040-SR. This deduction is temporary, first taking effect on 2025 tax returns filed next year, and ending after 2028.
How to Itemize on Schedule A
Question: I itemize deductions on Schedule A of the Form 1040 every year instead of claiming standard deductions. Can I take the $6,000 senior deduction even through I itemize?
Joy Taylor: Yes, the deduction is available to taxpayers who claim the standard deduction and to those who itemize on Schedule A of the Form 1040 or 1040-SR. I am guessing that the IRS will add another line to the 2025 Form 1040 after the line for standard deductions to account for this new senior deduction or, alternatively, add a line to Schedule 1 of the 1040.
https://www.kiplinger.com/taxes/tax-law/ask-the-editor-july-18-questions-on-the-senior-deduction
@pizzaman You left out the lower part of this dialog in Kiplingers which notes that the "new senior tax deduction" is subject to income level phaseout, so many people will not be able to take advantage of it.
First, thank you for this wonderful product. I am a relatively new user and enjoying it a great deal.
I wonder if you can check the additive logic on Schedule A. My form Schedule A shows a total on Line 17 which is exactly $10,000 higher than the addition of lines 4, 7, 10 and 14. Can you check this?
Hi this is Charlie Stone. Thank you for subscribing. This is a great question and I thank you for asking about it.
The $10K difference in 2025 is for one of your Miscellaneous Expenses which you specified is tax deductible. The amount is added to the Schedule A line 17 total and should be, but is not shown on Schedule A Part 5 Other Itemized Deductions, line 16. This is an oversight on my part.
I am surprised no one else has asked about this. In the next release, I will add Line 16 to Schedule A.
To make matters more interesting the miscellaneous itemized deductions were suspended by TCJA (which may be why I removed the line 16). OBBBA made the suspension permanent. Our new OBBBA summary mentions this and adds "Pralana subscribers should carefully review any Miscellaneous Expenses designated as tax deductible."
Yet, as Pralana cannot possibly implement all provisions of federal tax law there may be some Schedule A deductions that we cannot directly handle and so using tax deductible Misc Expenses provides a 'catch-all' for these. Note that Pralana does not apply any threshold or limit on line 16 Misc Deductions.
I invite you and others to provide comments/suggestions about this.
Also, I would note that that property taxes are included by Pralana in Schedule A line 5b and you did enter taxes as a property operating expense and you have that amount on line 5b.. If your $10K Misc Expense is intended to represent these same property taxes, then you are double counting these taxes in your plan. Because property taxes are subject to the line 5e limit, it is better to include them on the property operating expense page, which you did, and not as a deductible Misc Expense which has no cap.
Charlie
Amazing response. You are correct on all counts. I will modify my Misc Expenses because it is now double-counting.
