Calculation of self employed health insurance deduction

[apangburn]

I'm trying to figure out how Turbo Tax has calculated my self-employed health insurance deduction.  I entered the amounts from my schedule 1095-A and received a tax credit.  Nowhere did I enter the actual premiums that I paid.  Turbo Tax has calculated a self-employed health insurance deduction, which I thought would have been the amount of premiums that I actually paid less the tax credit amount, which it is not.  Can anyone tell me how the health insurance deduction is calculated by Turbo Tax based on the the amounts entered from Form 1095-A?

[MinhT1]

The self-employed health insurance premium (assuming you have no insurance other than the Marketplace policy) is equal to your premiums in column A of the form 1095-A minus the advance payment of the premium credit in column C minus the premium tax credit you have at tax time.

[LisaNMex · Accepted solution]

I'm having the same problem -- credit and deductions figured by TurboTax don't add up to total premiums. I found the link below helpful. The Ferguson source is good--use it. I figured out credit and deductions using IRS instructions. It took me several hours and made my head spin--I felt I was going in circles and I was because it's an iterative calculation. I got the same answer as the Ferguson online calculator within about 10 dollars. But now I don't know how to override TT forms to enter a different AGI for premium tax credit (doesn't seem possible). And I understand that if I do, the tax forms won't be accepted online. TT seems to be lagging on this. It looks to me that the gain if we get this right will be about $250. Can't shrug that off. We may have to fill out our tax forms and send them in by mail. Hard to believe! I'll call TurboTax -- maybe they'll give a partial reimbursement? Basically the software isn't working properly for at least some self-employed people who bought health insurance through ACA. If you find out more, please share.

https://thefinancebuff.com/when-tax-software-gives-self-employed-wrong-aca-premium-subsidy.html

[apangburn]

That makes sense, but that's not what has been calculated by TurboTax.  Column A  31849 - Column C 12730 - Credit calculated by TurboTax of 3692 = 15427.  The self-employed health care deduction calculated by TurboTax is 13899.  This doesn't make sense.  Is there a bug in the program?

[apangburn]

I'm wondering if there is a way to report a bug?  Even if we could override the calculation it would be helpful.

[LisaNMex · Accepted solution]

abangburn--

I have a solution to my problem. See this conversation thread.

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/re-overriding-agi-in-form-8962-t...

If I'm reading your numbers correctly (might not be), it looks as if TT credit and deduction is about $2500 short of total premiums paid. If you want to try solution that worked for me, use the link to Ferguson calculator to figure best credit based on your income (or follow IRS instructions, but they'll make you crazy). Enter deduction (difference between total premiums and best credit) in your business expenses (it will tell you not to do this). But first uncheck box indicating you bought health insurance through ACA. TT will then fill out 8962 showing best credit. Make sure deduction and credit add up to no more than total health insurance premium--I had to adjust my figures by $1. Good guidance and explanations in guidance above. Hope this helps.

[GeorgeM777]

In response to your first post, your premiums are not listed on your 1095-A, and nor do you enter them into TurboTax.  What is listed on your 1095-A and also what is entered into TurboTax is the premium amount for the second-lowest-cost Silver plan (SLCSP).  The SLCSP is important because its price is used to calculate premium subsidies.  You may not have been enrolled in the SLCSP; however, it is the plan that was used to calculate your premium credit. 

The difference in what you were eligible to receive in terms of a premium tax credit and what you paid in premiums determines whether you will receive a refund or whether you need to pay additional tax.  

@apangburn

[apangburn]

Thank you!  I will give this a try!

[apangburn]

I agree.  The premium credit amount makes sense, but the amount of the self-employed health care deduction doesn't make any sense at all.  I can't calculate it from any of the numbers that I input.  

[LisaNMex]

If you have the PTC from the calculator, subtract that amount from the total premiums for your 2022 health coverage reported in column A of 1095-A. This is your health insurance deduction. Put this amount into your business expenses. Then go to form 8962 to see the total credit shown (line 24). The deduction and credit should not be more than the total premiums. I had to adjust my deduction by $1.

[CatinaT1]

GeorgeM777 explained well how the Premium Tax Credit is reconciled. The Self-Employed Health Care Deduction will only apply to your actual out-of-pocket premiums paid that were not eligible for reimbursement of premium tax credit.

The amount used for the deduction would be any money you paid over and above the premium tax credit reconciled to you.  

For instance, let's say your insurance cost was $500 per month and you qualified for $400 per month of advanced premium tax credit based on the income you estimated for the year when you applied for the insurance.  You paid $100 per month out of pocket for your insurance.

You can not necessarily calculate your Self Employed Health Care Deduction based on the $1200 you paid out of pocket. You first have to reconcile your credit.

Using the example above:

Based on your actual income for the year and the information on your 1095-A, you actually qualified for $450 per month of premium tax credit. Since you only received $400 per month, but qualified for $450 per month, you will now receive $600 of premium tax credit based on your reconciled amount. Your Self Employed Health Care Deduction will be calculated on the $600 you actually ended up paying out of pocket for the year.

Alternatively, if you used more premium tax credit than you qualified for based on your reconciliation and using the same scenario above:

Based on your actual income for the year and the information on your 1095-A, you actually qualified for only $300 per month of premium tax credit. You will have to pay back $1200 of the advanced premium tax credit you received ($400 advanced - $300 actual x 12 months). Your Self Employed Health Care Deduction will be based on the $1200 you paid out of pocket during the year, plus the $1200 you have to pay back based on your reconciliation. ($100 per month paid + $100 of premium tax credit paid back = $200 per month actual out-of-pocket cost or $2400 for the year)

[crstauf]

It is pathetic that we have to figure this out ourselves. The point of TurboTax is to trust the software and not have to stress over whether the numbers are correct or not. Why is TT not fixing this?

[Laura22334455]

I agree with your explanation of the calculation! However, Turbo Tax isn't calculated the deduction correctly on my return, just as it never has in many past years. We have to pay back excess subsidy received of about $500, as shown on 8962 line 29 and Sch 2 line 2. Turbo Tax is NOT adding that to the self employed health insurance deduction (Sch 1, line 17); it is however, adding a phantom amount of $72 to the amount reported on Sch 1, as well as printed this at the bottom of the self employed health and long-term care insurance deduction worksheet: "A self employed health insurance deduction of $72 from premiums paid through an exchnge is included as an adjustment to income but does not appear on these worksheets." How can I fix this other than override?

[LisaNMex]

I can only tell you what worked for us. We told Turbo Tax that we DID NOT purchase our insurance through the marketplace. I used Ferguson calculator to determine PTC and self-employment deduction based on our income (link to calculator is in one of my messages--let me know if you can't find it). I used this info to entered self-employment deduction in business expenses, where by the way the guidance is NOT to do this (ignore). TurboTax then correctly figured premium tax credit on the PTC form. I made sure deduction and credit did not equal more than total premiums for health insurance. Make small adjustments to the self-employment deduction if they do. Good luck!

[AnnetteB6]

In order to take a closer look at the situation you have described, it would be helpful and give us a headstart if we can take a closer look to see what is happening with your tax return.  

You can provide us with a diagnostic copy of your tax file to make that possible.  The diagnostic file will not contain personally identifiable information, only numbers related to your tax forms.  If you would like to provide us with the diagnostic file, follow the instructions below and post the token number along with which version of TurboTax you are using in a follow-up thread.

Use these steps if you are using TurboTax Online:

• Sign in to your account and be sure you are in your tax return.
• Select Tax Tools in the menu to the left.
• Select Tools.
• Select Share my file with agent.
• A pop-up message will appear, select OK to send the sanitized diagnostic copy to us.
• Post the token number here. 

If you are using a CD/downloaded version of TurboTax, use these steps:

• Select Online at the top of the screen.
• Select Send Tax File to Agent.
• Click OK.
• Post the token number here.

@Laura22334455