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How is self employment health insurance deduction calculated?

Forum|Forum|7 years ago
June 5, 2019
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I am self employed with an ACA individual policy paid out of the business and I did not receive a subsidy for 2017. After inputting my 1095-A information I went to the 1040 line 29 worksheet and input my Medicare wages on line B. After doing this, the text at the bottom of the worksheet gave me my adjustment which was placed on 1040 line 29 (self employed health insurance deduction). The problem is that my total premiums on 1095-A were $14325 but the adjustment (and 1040 line 29 entry) was only $8108. I am unable to find where, why or how this was recalculated

TurboTax Home & Biz Windows

Best answer by DanielV01

That is the delicate balance of the deduction. Your deduction is first limited to the amount of self-employment income. Clearly, that's not at issue here because you have more self-employment income than you do healthcare premiums. But the Premium Tax Credit can also interfere with the calculation, and there's no real "worksheet formula" that can work it out, because the solution is a true "chicken-and-egg" problem.

Here's what the IRS says: your self-employment deduction cannot be greater than the difference of the actual premium amount minus any credit you receive. Problem is: when you put the full deduction, you create more credit, so the numbers don't line up. So the IRS says you can use any method to get the correct balance, and that's literally what I've had to do, because when you lower the deduction, the credit goes down also.

The manual override is the solution, but you will probably have to work the numbers several times so that, in the end, the formula is:

Health Insurance Premiums minus Premium Tax Credit is equal to or greater than the Self-Employed Health Insurance deduction, and the deduction must be equal to or less than your eligible Self-Employment income.

DanielV01

Employee

Two questions: How much net self-employment do you have, and are you receiving any Premium Tax Credit as a part of your return? You may not have claimed subsidies throughout the year, but if you qualified for them they will be applied on your tax return now. Both of those items affect how much deduction you are entitled to claim.

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J

jluftman57Author

My total income (line 22) is $76582. Subtract the $8108 and my AGI (line 37) is $68474.
(W2 wages $47925, K1 $26239) Medicare wages $33600 for the line 29 worksheet.

I did not claim or receive any subsidy as the threshold for me is an AGI of $63720.

If I override line 29 with the actual premium amount of $14325 my AGI becomes $62257, which gives me a refund (subsidy).

J

jluftman57Author

How can I efile if I do an override?

P

pfschmitz

Is there a way to do an eFile if I have an override?

DoninGA

Employee

@pfschmitz wrote:

Is there a way to do an eFile if I have an override?

If you override a calculated field on a form or schedule when in Forms mode, you will negate the TurboTax 100% Accurate Calculation guarantee and you will not be able to e-file the tax return.

DanielV01Answer

Employee

That is the delicate balance of the deduction. Your deduction is first limited to the amount of self-employment income. Clearly, that's not at issue here because you have more self-employment income than you do healthcare premiums. But the Premium Tax Credit can also interfere with the calculation, and there's no real "worksheet formula" that can work it out, because the solution is a true "chicken-and-egg" problem.

Here's what the IRS says: your self-employment deduction cannot be greater than the difference of the actual premium amount minus any credit you receive. Problem is: when you put the full deduction, you create more credit, so the numbers don't line up. So the IRS says you can use any method to get the correct balance, and that's literally what I've had to do, because when you lower the deduction, the credit goes down also.

The manual override is the solution, but you will probably have to work the numbers several times so that, in the end, the formula is:

Health Insurance Premiums minus Premium Tax Credit is equal to or greater than the Self-Employed Health Insurance deduction, and the deduction must be equal to or less than your eligible Self-Employment income.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

J

jluftman57Author

Just to be clear, and assist anyone else looking for this answer, Form 8962 is the Premium Tax Credit and line 8a must be greater than line 26, correct?

Not a very elegant solution. Nothing about ACA is easy. I wish TT had better workflow for this. Thank you very much for your help!