I am self employed and because of family needs I had to live off my savings in 2018. I will make about $7,000 passive income this year plus my wife’s min dist inherited IRA of $11,000. I file married jointly and this year the standard deduction is $24,000 plus bonus over 65 $1300 deduction. I need to show approx $29,000 in income for my wife to be reinstated to her Covered CA medical plan. Without our knowledge Medi-CAL removed her from her Covered CA plan and put her on Medi-Cal because we reported ZERO income in August on our medical form paperwork which I had to do because I became eligible for Medicare. Because I could not show any proof of income Medi-Cal said I had to report ZERO income and then submit when I had proof of the distribution and I had to stay on Medi-Cal in the meantime. My wife does not want to be on Medi-CAL – because from what we understand Medi-Cal will attach your assets for any medical services received to your inheritance and take assets when you die to cover the services they provided. We learned about this when Medi-Cal sent my wife a 20+ page form asking for every financial account we had including our Savings, IRA’s, life insurance policies, cash, etc. The form leaves no stone unturned.
Do I simply take a larger inherited IRA distribution to take advantage of the $25,300 standard deduction (married filing joint)? I’m estimating I’d increase the Inherited IRA to about $30,000 + $7,000 = $37,000 gross income – 25,300 deduction = $11,700 AGI? OR Should I do a partial conversion of my wife’s RolloverIRA into her Roth IRA (she has two stocks that as of Oct. 27th, show gain a of $12,000 each (24,000 total)? And is that gain considered regular income or long-term capital gains?