2020 Medical Expenses Worksheet Line 2b - calculate before or after subsidy? (TT handles it differently from previous years)

[hiroo]

I'm working on a return where the handling of the Medical Expenses Worksheet, Line 2b is seems to be different from previous years and how TurboTax 2020 also handled it prior to an update installing.

I had my return mostly completed, but then TurboTax wanted to run an update. After the update, I noticed that my refund went down by $300. When I compared what was different now compared to a PDF that I had saved previously, I noticed that it was because TurboTax switched me from Itemized Deductions to Standard Deduction. Then when I looked at the Deductions worksheet, I found that my medical expenses had gone down, which put me under the Standard Deduction amount.

When I compared the Medical Expenses Worksheet to my saved PDF from before the update, there was a big difference in line 2b. Before the update, the amount in 2b was the total of all the amounts from 1095-A, Lines 21-32 (basically, total of monthly insurance premiums, before advance payment of premium tax credit). After the update, the amount in 2b is basically the total of the insurance premiums I paid out of pocket (after advance payment of premium tax credit). Obviously, the amount after the update is lower than before.

As far as I can tell, the method for 2b is correct after the update (calculate insurance premiums after the subsidy).  Can somebody confirm this?

However, I went back a couple of years to check how this was handled by TurboTax previously, and it appears that it used the old method for 2b (gross insurance premiums before subsidy).  So has it been incorrect the past few years and also this year prior to the latest update?  Or did something in the tax code change?

[gloriah5200]

If you signed up for a health insurance plan through Healthcare.gov or your state Marketplace or exchange, don't enter the premium amounts you paid in the medical section. We'll get the details on those plan premiums in the Health Insurance section. These are included on your 1095-A, a form you'll receive from your Marketplace.

We don't need any info from your 1095-B or 1095-C, but it's a good idea to hold on to them for your records.

You might verify what you entered and what the software entered in these areas to be sure.

Here is another area to look into:

you can't deduct medical expenses that were paid with a health savings account (HSA), medical savings account (MSA), flexible spending account (FSA) or health reimbursement account (HRA). These are all pre-tax accounts, and you can't deduct medical expenses that were paid with a pre-tax account.

When you use a pre-tax account to pay for medical expenses, you're paying with tax-free money. You're not allowed to deduct tax-free money because it's considered double-dipping.

With the increased standard deduction starting in tax year 2018, the chances of being able to deduct medical expenses is significantly lower. Taking the medical expenses out of a pre-tax account is more beneficial to the taxpayer than taking the expenses as a deduction in the event you take the standard deduction.

[Edited 04/15/2021|6:39 pm pst]

[hiroo]

Thanks for the reply. However, it doesn't address my question at all. (I'll admit I may have buried it in the details).  I'll try to simplify it. This isn't actually about what I enter, since (as you point out) this info is auto-populated.

Using TT Premiere 2020, Medical Expenses Worksheet, Line 2b:

1) Prior to a TurboTax update installed recently, 2b was filled (by TT from 1095-A) with the total of insurance premiums paid (BEFORE subsidies). This is consistent with what TurboTax did for the two prior years (2019, 2018) that I checked.

2) After the update, the amount in 2b went down because it was filled by TT with the total of insurance premiums paid (AFTER subsidies).  This is different from what TurboTax did in 2019 and 2018 (and maybe further back but I didn't check).

Question: Which method of calculating 2b is correct?  

If method #2, then why did TT do it like #1 in prior years, and also this year (2020) until the most recent update?

Thank you.

[jfunkhouser]

I had the same issue.  I didn't change anything but the update reduced my total medical and dental expenses by $2,700.  I did not enter any of the 1095A information in the medical section it was entered in the 1095A section.