TurboTax Giving Way Too High of Self-Employed Health Insurance Deduction by Ignoring APTC Repayment Limitation

I’m a sole proprietor with marketplace health insurance using TurboTax Home & Business Desktop 2024. So I enter my 1095-A data and link my plan to one of my Schedule C businesses and it calculates my Self-Employed Health Insurance Deduction (SEHID) which it then puts on Schedule 1, Line 17.

I’m still deciding how much Traditional retirement contribution I want to make. So I’m testing different amounts and each amount changes my AGI. At many AGIs, TurboTax seems to calculate my SEHID accurately. But at quite a few AGIs, it’s calculating what seems to be a very incorrect SEHID.

It’s actually calculating the SEHID seemingly incorrectly in a couple different ways at different AGIs. But there is one way in particular that seems to be a clear and common pattern.

When my AGI gets below the 400% FPL level, my APTC repayment is then limited to $1575 and I only pay back that $1575. It seems like my SEHID then shouldn’t possibly be allowed to be more than the premiums I already paid before plus $1575. However, TurboTax is calculating the SEHID to be the premiums I already paid before plus the APTC repayment that I would have to pay if it wasn’t limited.

So imagine I paid $1000 in premiums out of pocket throughout the year. And imagine the APTC repayment amount without the limitation would be $4000. But the repayment is actually capped to $1575 since my AGI is below 400% FPL. TurboTax is calculating an SEHID of $5000 ($1000+$4000), when it seemingly should only be $2575 ($1000+$1575). That SEHID of $5000 seems much higher than it should be or I think it’s allowed to be. I don’t think the IRS allows an SEHID that’s more than the total premiums plus actual APTC repayment you pay out of pocket, do they?

You might think TurboTax would catch that things don’t add up correctly at the end during its Review, but it does not flag it at all.

I’ve heard problems like this sometimes happen when the AGI is near a cliff like the 400% FPL level. And the problem is happening at those AGIs, which is bad enough since it’s exactly those cliff levels we often want to target when reducing our AGI with Traditional contributions. But it’s also happening at other AGIs farther away from the cliff too.

I also know some people mistakenly think their SEHID is wrong because they don’t realize it’s capped by their net business profit minus the deductible half of Self-Employment tax minus their Traditional contributions. However, this is a totally different issue. And in this case, the problem is it’s giving me way too high of an SEHID, not seemingly too low of one as in that other scenario.

This is causing a problem in multiple ways.

First, if many of the SEHID calculations are incorrect, I can’t trust the data when testing which level of Traditional contributions gets me the best results. Many of the results are actually faulty. So I have no idea how to figure out my best Traditional contribution number.

Second, I want to file soon and I don’t see how I can file with an SEHID that’s thousands of dollars higher than seems like should be allowed.

Perhaps there is something about the SEHID calculation that I don’t understand and these SEHIDs are actually correct. I would love to find out that’s the case. But I’m highly doubtful based on my knowledge of the rules, how the results compare with those from other online calculators given the same numbers, and also some other strange things TurboTax is doing as I move between different AGIs.

If I’m correct and TurboTax is calculating many of these SEHIDs wrong in this way, it would seem a great number of self-employed people may be filing with very incorrect SEHIDs.

One way to troubleshoot this would be to look at Form 7206. However for self-employed people using ACA, TurboTax doesn’t actually fully complete Form 7206 and just puts a footnote with the calculated SEHID at the bottom of it that can be viewed in Forms mode. So not only can’t we use Form 7206 to see what’s happening with the calculation, but maybe that’s part of why it’s calculating the SEHID incorrectly. If it correctly filled out Form 7206, it seems like the very first line on the form would prevent this issue from happening.

Given that it’s only weeks from April, this is becoming an urgent problem. Can someone help? I’d appreciate help here on this forum. And I’d also be happy to call in and talk to someone at TurboTax and show them in detail what’s happening if that will help them troubleshoot this problem and advise me what to do.