"My theory is that it is a problem for us because our AGI is right around 400% of poverty level--it is just below at 396% when credit/deduction is to our best advantage."
You are correct. The normal iterative process fails to converge when it flips back and forth over the threshold, so TurboTax substitutes a solution provided in IRA Pub 974 that is guaranteed to be legal but is usually sub-optimal.
