rjs
Level 15
Level 15

Business & farm

The Self-Employed Health Insurance Deduction depends on the total Premium Tax Credit on Form 8962 line 24, not on the Advance Premium Tax Credit.


When you have both the Self-Employed Health Insurance Deduction and the Premium Tax Credit, the calculation of the two amounts is extremely complicated because each one affects the other, so it is a circular calculation. There are multiple ways to do the calculation, and they will produce different results. IRS Publication 974 has 13 pages of instructions on how to do the calculation (not including the 6-page example of the "simplified" calculation method).


Publication 974 includes the following note.


"If you are eligible for both a self-employed health insurance deduction and the PTC for the same premiums, you may use any computation method that results in reporting amounts that satisfy the rules for both the deduction and PTC, as long as the sum of the deduction claimed for the premiums and the PTC computed, taking the deduction into account, is less than or equal to the enrollment premiums."


So there is no single correct result. Any of the different results from different calculation methods is acceptable, as long as it satisfies the requirement stated in the preceding paragraph from Publication 974. Different calculation methods might increase or decrease your overall tax.


The TurboTax list of Unsupported Calculations says the following.


"Claiming the Self-Employed Health Insurance Deduction with the Premium Tax Credit: When both the self-employed health insurance deduction and the premium tax credit are involved in a return there are situations where the circular calculation that this involves does not converge to amount that is within $1. See IRS publication 974, the Self-Employed Health Insurance Deduction and Premium Tax Credit section for more details. When this is the case the tax return can alternate between two significantly different states. This commonly occurs where the self-employed health insurance deduction causes the federal poverty level to be under 400% but then the Premium Tax Credit provided reduces the self-employed health insurance deduction, then the federal poverty level goes over 400% and no Premium Tax Credit is available. In this case you should refer to IRS publication 974, the Self-Employed Health Insurance Deduction and Premium Tax Credit section for the calculation requirements."


If you are not satisfied with the result you are getting from TurboTax, see "Self-Employed Health Insurance Deduction and PTC" in Publication 974. The 2021 edition of Pub. 974 is not available yet. This link will give you the 2020 edition. The same link will give you the 2021 edition when it becomes available.