Medical Premium Reimbursements

[john4kathy1]

I am retired and my company reimburses me for 75% of my medical premiums.   I received a 1095A for the premiums, which was entered into Turbo Tax, which then put that information into the medical expense worksheet,  which feeds the itemized deduction worksheet.   I do not receive a 1099 for the premium reimbursement from my company.   While I read that medical premium reimbursements are not  taxable, it doesn't seem right to get the 100% deduction for paying for the premium when, I am being reimbursed for 75% of it.   Does the 75% amount get entered on the medical expense worksheet as a reimbursement  (assume line 13B) or, is the reimbursement amount not entered on my taxes?

[HelenC12]

Yes, the 75% medical reimbursement from your employer gets entered on your taxes if you itemize your deductions. Please see the following: 

• If you itemize, you can either subtract the reimbursement from the expenses you originally paid and enter the new expense amount, or enter it after you've finished entering all of your medical expenses. Either way, the reimbursement simply reduces your medical expense deduction by that amount.
• If you take the standard deduction, you don't have to enter the reimbursement.

[john4kathy1]

Hello,

When I take the standard deduction, I still receive a large tax credit from the "Premium Tax Credit" form 8962.  This form uses the 1099A information entered to calculate the credit.  There is no option to enter any HRA reimbursement on this form.  Is this now correct? 

[GSY]

I have a similar situation.  I retired on August 31st and started in the marketplace on 9/1. I enter my 1095-A information into TurboTax and I'm being given a premium tax credit.  My employer through a HRA, provides a fixed yearly contribution which offsets some of the premium costs.  Where would I enter the HRA information to offset the premium tax credit?  I know that I can't take both the premium tax credit and HRA reimbursement.  I'm taking the standard deduction.  

[TeresaM]

It depends. If the Health Reimbursement Arrangement money is included as taxable income on your Form W-2, then it was part of your pay and taxable income. If it was taxable income, you should be able to take the Premium Tax Credit with your Marketplace health insurance.

Employers have two choices. They can provide you with employer-sponsored group health insurance and offer an HRA to reimburse you tax-free for out-of-pocket costs like co-pays. Or, if they have fewer than 25 employees and are exempt from the ACA employer mandate, they can provide you with taxable money to buy your own insurance, which is essentially treated as a pay raise.

If the HRA funds are not included in the taxable income on your Form W-2, then indeed, this is a problem.

[GSY]

The HRA funds are not included in W2 so I do have a problem.  Any suggestions?

[BillM223]

There are no reporting requirements on the 1040 for your HRA. The employer contributions to your HRA are not reported in income. The payments you receive to pay for medical expenses are also not reported by you.

Unfortunately, although the HRA predates the ACA, the way the 8962 works didn't take into account that your ACA premiums might be reimbursed by your employer.

So, you are correct that you can't get the Premium Tax Credit and also get the reimbursements. Well, you CAN get them, but you don't get to enjoy both. 

What you can do, is to determine the amount of the PTC that is being reimbursed by the HRA, and then add it as Other Income on Schedule 1 of the 1040. In TurboTax under Wages & Income, look for Less Common Income and choose Miscellaneous Income. Add it there with a description of "reimbursed PTC".

@GSY

[GSY]

Thank you for the solution Bill!  This should be addressed in TurboTax as I spoke to someone last night that I used to work with, who uses TurboTax, and she was unaware of the issue.  She had already filed her taxes so she will need to amend her return.   

[john4kathy1]

Hello Bill, I have two concerns with this solution. The first is by declaring it as income, it increases my state tax due. The second is, if the point is to reduce the Premium on the 1095A to the amount I actually paid, putting it as income gives me a significantly different tax obligation from what I get when I simply reduce the premium amount on the 1095A form. Of course I don't like changing what I report is on the 1095A but, as you say, the IRS doesn't have a 8962 form that takes the reimbursement into account. Would I be better off changing the premium amount on the 1095A or do you feel it has to be reported as income? If yes, what do I do about my state?

[arnollj]

Will this be corrected in Turbotax?

[GSY]

Bill,

The solution that you provided sounded good but it did increase my state tax obligation and on the federal side it gave me a number that is not correct.  The figure is in the middle of not taking the PTC at all and what TurboTax determines with PTC.  Will TurboTax be providing a fix?  

[MarilynG1]

I wouldn't advise changing any amounts on your 1095-A form.  The IRS looks closely at these, and you would probably get a letter if you do so.

Does your state allow you to claim Medical Expenses that weren't part of Itemized Deductions (if you claim the Standard Deduction)?  Many states do.  If so, you can claim your 1095-A premiums to offset the extra income reported.  

Remember, it is actually income you received (to pay your medical expenses). 

If you Itemize, you are claiming expenses/reimbursements in that section, so no problem there.  Your AGI that transfers to the state is correct to calculate state tax.

I have no knowledge of a planned fix for this situation, but will report it as directed when we see these situations.

[GSY]

I found the paragraph below on Healthcare.gov which covers my situation as I was reimbursed for all my premiums.  TurboTax needs to look at this issue as some people will be receiving larger returns than entitled.  Also, TurboTax states that the IRS will not process your return without the 1095-A information which is contrary to what is stated on Healthcare.gov.   

If you paid full price and are sure you don't qualify for a premium tax credit

• You don’t have to fill out or include Form 8962, Premium Tax Credit, when you file your federal taxes.
• Keep your Form 1095-A with your other tax records

[mgwh686]

I have the same situation. I get a reimbursement from my retiree benefits in an HRA reimbursement scheme, but my insurance is from the Marketplace, and I am not allowed to get a Premium Tax Credit.   When I enter the 1095-A into TurboTax, it wants to give me a huge reimbursement, which I am not entitled to.

To clarify the solution provided above, all we have to do is simply go into the TurboTax forms and delete the Form 8962, but make sure we have the 1095-A remaining in our tax return?

Thanks.  And TurboTax, please pay attention to fixing this!!  I could have very easily made an error by receiving an additional $20K+ refund that I was not entitled to, by inadvertently double-dipping in the HRA and the PTC!!!  We expect better expertise from you.

[mgwh686]

Deleting the 8962 doesn't work.