(In a normal year) The Self-employed Health Insurance Deduction as shown on line 16 for a taxpayer who has Marketplace insurance is generally the sum of the amount of after-tax dollars that you paid in health insurance premiums as shown on the 1095-A PLUS any excess Premium Tax Credit (PTC) that you have to repay (more on that later).
Then the amount that is carried to line 16 has to be potentially limited; there is a worksheet in the 1040 Instructions for calculating it - see page 89).
For example, what typically catches taxpayers is that the line 16 entry can't be larger than your net profit minus the deductions on line 14 and 15 (the deductible part of the SE tax and the contributions to your Self-Employed SEP, SIMPLE, and Qualified Plans). So increasing your retirement contributions can actually decrease your self-employed health insurance deduction. So you need to complete the worksheet for line 16 to see how TurboTax actually calculates the Self-employed Health Insurance Deduction.
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Now, having said all this, you guys know that the American Rescue Plan now states that no one has to pay back excess Premium Tax Credit. Unfortunately, that's ALL the law says.
What about the excess PTC that is carried to line 16? Is it still deductible even though you no longer have to repay it?
The IRS has yet to issue "guidance" on this, which means that we simply don't know how to implement this correctly. As a result, the only thing we know is that this calculation may change.
TurboTax will implement and test the changes as soon as the IRS releases its guidance. Until then, we ask for patience.
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