I'm trying to figure out how Turbo Tax has calculated my self-employed health insurance deduction. I entered the amounts from my schedule 1095-A and received a tax credit. Nowhere did I enter the actual premiums that I paid. Turbo Tax has calculated a self-employed health insurance deduction, which I thought would have been the amount of premiums that I actually paid less the tax credit amount, which it is not. Can anyone tell me how the health insurance deduction is calculated by Turbo Tax based on the the amounts entered from Form 1095-A?
I'm having the same problem -- credit and deductions figured by TurboTax don't add up to total premiums. I found the link below helpful. The Ferguson source is good--use it. I figured out credit and deductions using IRS instructions. It took me several hours and made my head spin--I felt I was going in circles and I was because it's an iterative calculation. I got the same answer as the Ferguson online calculator within about 10 dollars. But now I don't know how to override TT forms to enter a different AGI for premium tax credit (doesn't seem possible). And I understand that if I do, the tax forms won't be accepted online. TT seems to be lagging on this. It looks to me that the gain if we get this right will be about $250. Can't shrug that off. We may have to fill out our tax forms and send them in by mail. Hard to believe! I'll call TurboTax -- maybe they'll give a partial reimbursement? Basically the software isn't working properly for at least some self-employed people who bought health insurance through ACA. If you find out more, please share.
https://thefinancebuff.com/when-tax-software-gives-self-employed-wrong-aca-premium-subsidy.html
abangburn--
I have a solution to my problem. See this conversation thread.
If I'm reading your numbers correctly (might not be), it looks as if TT credit and deduction is about $2500 short of total premiums paid. If you want to try solution that worked for me, use the link to Ferguson calculator to figure best credit based on your income (or follow IRS instructions, but they'll make you crazy). Enter deduction (difference between total premiums and best credit) in your business expenses (it will tell you not to do this). But first uncheck box indicating you bought health insurance through ACA. TT will then fill out 8962 showing best credit. Make sure deduction and credit add up to no more than total health insurance premium--I had to adjust my figures by $1. Good guidance and explanations in guidance above. Hope this helps.
The self-employed health insurance premium (assuming you have no insurance other than the Marketplace policy) is equal to your premiums in column A of the form 1095-A minus the advance payment of the premium credit in column C minus the premium tax credit you have at tax time.
I'm having the same problem -- credit and deductions figured by TurboTax don't add up to total premiums. I found the link below helpful. The Ferguson source is good--use it. I figured out credit and deductions using IRS instructions. It took me several hours and made my head spin--I felt I was going in circles and I was because it's an iterative calculation. I got the same answer as the Ferguson online calculator within about 10 dollars. But now I don't know how to override TT forms to enter a different AGI for premium tax credit (doesn't seem possible). And I understand that if I do, the tax forms won't be accepted online. TT seems to be lagging on this. It looks to me that the gain if we get this right will be about $250. Can't shrug that off. We may have to fill out our tax forms and send them in by mail. Hard to believe! I'll call TurboTax -- maybe they'll give a partial reimbursement? Basically the software isn't working properly for at least some self-employed people who bought health insurance through ACA. If you find out more, please share.
https://thefinancebuff.com/when-tax-software-gives-self-employed-wrong-aca-premium-subsidy.html
That makes sense, but that's not what has been calculated by TurboTax. Column A 31849 - Column C 12730 - Credit calculated by TurboTax of 3692 = 15427. The self-employed health care deduction calculated by TurboTax is 13899. This doesn't make sense. Is there a bug in the program?
I'm wondering if there is a way to report a bug? Even if we could override the calculation it would be helpful.
abangburn--
I have a solution to my problem. See this conversation thread.
If I'm reading your numbers correctly (might not be), it looks as if TT credit and deduction is about $2500 short of total premiums paid. If you want to try solution that worked for me, use the link to Ferguson calculator to figure best credit based on your income (or follow IRS instructions, but they'll make you crazy). Enter deduction (difference between total premiums and best credit) in your business expenses (it will tell you not to do this). But first uncheck box indicating you bought health insurance through ACA. TT will then fill out 8962 showing best credit. Make sure deduction and credit add up to no more than total health insurance premium--I had to adjust my figures by $1. Good guidance and explanations in guidance above. Hope this helps.
In response to your first post, your premiums are not listed on your 1095-A, and nor do you enter them into TurboTax. What is listed on your 1095-A and also what is entered into TurboTax is the premium amount for the second-lowest-cost Silver plan (SLCSP). The SLCSP is important because its price is used to calculate premium subsidies. You may not have been enrolled in the SLCSP; however, it is the plan that was used to calculate your premium credit.
The difference in what you were eligible to receive in terms of a premium tax credit and what you paid in premiums determines whether you will receive a refund or whether you need to pay additional tax.
@apangburn
I agree. The premium credit amount makes sense, but the amount of the self-employed health care deduction doesn't make any sense at all. I can't calculate it from any of the numbers that I input.
If you have the PTC from the calculator, subtract that amount from the total premiums for your 2022 health coverage reported in column A of 1095-A. This is your health insurance deduction. Put this amount into your business expenses. Then go to form 8962 to see the total credit shown (line 24). The deduction and credit should not be more than the total premiums. I had to adjust my deduction by $1.
GeorgeM777 explained well how the Premium Tax Credit is reconciled. The Self-Employed Health Care Deduction will only apply to your actual out-of-pocket premiums paid that were not eligible for reimbursement of premium tax credit.
The amount used for the deduction would be any money you paid over and above the premium tax credit reconciled to you.
For instance, let's say your insurance cost was $500 per month and you qualified for $400 per month of advanced premium tax credit based on the income you estimated for the year when you applied for the insurance. You paid $100 per month out of pocket for your insurance.
You can not necessarily calculate your Self Employed Health Care Deduction based on the $1200 you paid out of pocket. You first have to reconcile your credit.
Using the example above:
Based on your actual income for the year and the information on your 1095-A, you actually qualified for $450 per month of premium tax credit. Since you only received $400 per month, but qualified for $450 per month, you will now receive $600 of premium tax credit based on your reconciled amount. Your Self Employed Health Care Deduction will be calculated on the $600 you actually ended up paying out of pocket for the year.
Alternatively, if you used more premium tax credit than you qualified for based on your reconciliation and using the same scenario above:
Based on your actual income for the year and the information on your 1095-A, you actually qualified for only $300 per month of premium tax credit. You will have to pay back $1200 of the advanced premium tax credit you received ($400 advanced - $300 actual x 12 months). Your Self Employed Health Care Deduction will be based on the $1200 you paid out of pocket during the year, plus the $1200 you have to pay back based on your reconciliation. ($100 per month paid + $100 of premium tax credit paid back = $200 per month actual out-of-pocket cost or $2400 for the year)
It is pathetic that we have to figure this out ourselves. The point of TurboTax is to trust the software and not have to stress over whether the numbers are correct or not. Why is TT not fixing this?
I agree with your explanation of the calculation! However, Turbo Tax isn't calculated the deduction correctly on my return, just as it never has in many past years. We have to pay back excess subsidy received of about $500, as shown on 8962 line 29 and Sch 2 line 2. Turbo Tax is NOT adding that to the self employed health insurance deduction (Sch 1, line 17); it is however, adding a phantom amount of $72 to the amount reported on Sch 1, as well as printed this at the bottom of the self employed health and long-term care insurance deduction worksheet: "A self employed health insurance deduction of $72 from premiums paid through an exchnge is included as an adjustment to income but does not appear on these worksheets." How can I fix this other than override?
I can only tell you what worked for us. We told Turbo Tax that we DID NOT purchase our insurance through the marketplace. I used Ferguson calculator to determine PTC and self-employment deduction based on our income (link to calculator is in one of my messages--let me know if you can't find it). I used this info to entered self-employment deduction in business expenses, where by the way the guidance is NOT to do this (ignore). TurboTax then correctly figured premium tax credit on the PTC form. I made sure deduction and credit did not equal more than total premiums for health insurance. Make small adjustments to the self-employment deduction if they do. Good luck!
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Definitely can relate to headaches getting TurboTax to show healthcare credit and deduction values that made sense.
Phase I: Inadvertently entered the medical premiums in both the business health insurance deductions step-by-step *and* the PTC credit calculations step-by-step. (Slight difference in the two entries given the ever-so-slightly lower 1095A column A figure.) Ended up with a too-high figure in deductions that was about 160% more than what the total I paid for all healthcare insurances. And then there was a credit on top of that. Knew that couldn't be right.
Phase II: "Fixed" the business health insurance deduction by only leaving in the dental insurance there. 1095A stuff stayed in the credit calculation section. However, deductions plus credits ended up something in the order of $300 or so short of total premium expenditures.
Phase III: Added a line entry in the business health insurance deductions above my dental insurance entry for the $3 of premium insurance that was "not allowed" on the 1095A column A total. Note that my 1095 A figure was about $3 less than what I actually paid for the medical health insurance premiums, because some portion of my premiums were not deemed to be "essential medical benefits," and therefore were not eligible for the credit calculation. (Maybe there was a bit of vision benefit or health promotion hidden in my medical premiums?) Result was that suddenly the TurboTax total of my health insurance deduction plus the ACA credit came within $5 (rounding error?) of my actual total healthcare insurance expenditures.
Reflections: (1) The iteration calculations in TurboTax appear to be *very* sensitive to any numbers being off. Surprising that adding in the missing $3 seems to have fixed the calculations in my case. (2) Be careful of accidentally double-entering the medical insurance in both the business insurance deduction and APTC credit calculation sections of Turbotax. (3) Watch to account for any little smidgen of your premium that was not accepted in the 1095A column A totals. (4) I struggled with the Ferguson calculator. It seems to assume that the only relevant figures are on the form 1095A, and not clear how to find the MAGI for the final entry box - especially if you have dental insurance or a sliver of non-ACA eligible medical premium.
Unique situation, so no clue if this would be relevant for others, and no clue if the TT iteration for the credit is low or off. Only know that the deduction + credit finally equaled total premium expenditures. Unfortunately, TT call-in help was not able to help me identify the double premium entry problem. I had to crawl the interwebs to discover that.
I'm still looking for an updated answer to this — as far as I can see, this bug has not been resolved by TurboTax. The problem (for me) with your answer is "Based on your actual income for the year". For self employed individuals, "your actual income for the year" (I assume you mean AGI) is dependent on the amount of HI premium paid. Thus, if I deduct the actual premiums paid during the year ONLY, then my ending AGI requires me to repay some of the APTC. But then, if I calculate the AGI deducting both the premiums paid during the year AND the repayment APTC (which is the actual total that I will have paid for my insurance), then my AGI drops and the amount of APTC I need to repay is lower than the amount I used to calculate the AGI and that APTC repayment...... This is impossibly circular.
Why hasn't Turbo Tax corrected this?
My head is not in taxes yet, but looking back at this thread, my advice (as long as Turbotax hasn't changed) is:
Use the Ferguson calculator referenced on this webpage, which is all about the circularity of the calculation. You will enter your income BEFORE any ACA deduction.
https://thefinancebuff.com/when-tax-software-gives-self-employed-wrong-aca-premium-subsidy.html
This is the procedure that worked for us last year. We told Turbo Tax that we DID NOT purchase our insurance through the marketplace (we did purchase it through the marketplace--but saying we didn't allowed us to get around TT glitches). I used Ferguson calculator to determine PTC and self-employment deduction based on our income. I used this info to enter self-employment deduction in business expenses, where by the way the guidance is NOT to do this (ignore). TurboTax then correctly figured premium tax credit on the PTC form. I made sure deduction and credit did not equal more than total premiums for health insurance. Make small adjustments to the self-employment deduction if they do.
"Based on your actual income for the year". For self employed individuals, "your actual income for the year" (I assume you mean AGI) is dependent on the amount of HI premium paid.
Sorta, your actual income for the year for the APTC would be your Modified Adjusted Gross Income. Your MAGI is your AGI plus untaxed income such as excluded foreign income, untaxable social security benefits and untaxed interest income.
But then, if I calculate the AGI deducting both the premiums paid during the year AND the repayment APTC (which is the actual total that I will have paid for my insurance), then my AGI drops and the amount of APTC I need to repay is lower than the amount I used to calculate the AGI and that APTC repayment.
Yes, this does seem like a circular problem, but there is a workaround. You can either adjust how you enter your premiums or you can make a self-employed retirement investment as stated by dmertz in this link.
This is not working on my tax return. Form 1095-A column A is $8,375, Column C is $4,884, and I am due a premium tax credit of $406. Using your explanation, my self-insured health deduction should be $3,085. However, it is being calculated as $2,873, a number that I cannot find on any schedule or worksheet provided by Turbotax. In addition, schedule 7206 Self-Employed Health Insurance Deduction shows zero on the final line 14.
I do not file electronically, but I print out the forms and mail in my return. Should I include schedule 7206 even though it does not relate to the actual calculation of the deduction?
Please let me know why there is a difference in the calculation, and which is correct.
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Sounds to me that you just have to plug the correct numbers into TT.
Most people do actually NOT want to figure it out themselves. That is why most people buy TT!
They like the step-by-step and just plug in the numbers from a paper or a form in front of them,
and NOT have your head spinning by calculations (that the TT program makes for you).
Nerds like ourselves (I am a little one) are tempted to want to know exactly how what was calculated.
Most bail out after seeing the title in this thread - if they ever got there. Let alone read all the posts.
Begin thinking and calculating.
My conclusion is there is not a glitch.
The reconciling of the payments with AGI for purpose of self-employed deductions is slightly complex.
But at the basis of it: all logical, and you can think of it sitting on the couch, without any numbers in front of you.
Just thinking about what these premiums and credits are about ...
@LisaNMex I appreciate this post of yours and see from this post and another of yours in another thread that I'm struggling with some similar things to you regarding TurboTax calculating the SEHID, though maybe not exactly the same. Would you be willing to read over my post about my situation and see what you think? It's here: