Looking at my prospective solo 401k contribution: increasing from $2999 to $3001 my refund rises by $1, but at $3000 it drops by $214. Seems like a bug.

Forum|Forum|2 years ago
February 11, 2024
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TurboTax Online

Best answer by dmertz

It likely has to do with whether the iterative calculation for PTC and the self-employed health insurance deduction described in IRS Pub 974 converges to a stable result. The deduction for self-employed retirement contributions changes AGI, affecting the iterative PTC calculation. From $2,999 and $3,001 the calculation apparently converges to a stable result while for $3,000 it does not and TurboTax defaults to a more conservative result that lowers your refund.

dmertz

Employee

Do you have Marketplace insurance? If so, the result is not implausible due to the convoluted nature of the calculations.

davidmolerAuthor

I do have Marketplace insurance. I know there was a discontinuity with taxes (when crossing 400% FPL), but my understanding is that it was fixed thru tax year 2025. Maybe there are other impacts I'm not aware of.

What throws me is that it isn't just a discontinuous jump ($2999 to $3000), but that it jumps immediately back to the original trend ($3000 to $3001). I also see discontinuity at $1 (jumps $207), $6000 (drops by $221), $6001 (jumps $222), $8999 (drops $227), $9000 (jumps $228). Aside from these jumps, my refund is perfectly linear with my solo 401(k) contribution up to $10,000 (from the ~30 values I've tried).