SE Health insurance are being put under medical expenses

[socalgalish]

JFC I am so sick of Turbo Tax.... I thought I'd try the desktop version (H&B  - I'm a sole proprietor business) this year since the online version screwed it up so badly the past couple of years. So,  I'm self employed, got insurance through Covered CA (Affordable Care Act). TT asked if I had HI... then did I have a 1095-A form (Covered CA), I entered all the information and it correctly calculated what I needed to repay (slightly too much Advanced credit). The repayment plus the premiums should go under deductible HI premiums since I qualify for 100% deduction, but TT is placing it under Medical Expenses and puts 0 under HI deduction. Plus, there is an actual Affordable Care Act option for HI and it has put Zero into that section and will not take me that option. I need those SE HI premiums to deduct before my AGI, not in Schedule 1. This is the exact error that cost me hundreds last year. No matter how many steps I go back, it will not put my premiums into the "Affordable Care Act" section, even though you only get a 1095-1 from them. AND is incorrectly classifying then as medical expenses. PLEASE HELP!!!  

[Vanessa A · Accepted solution]

Did you already enter your business income and expenses?  If so, after you enter your 1095-A, there is a box to check that says "I'm self employed and bought a Marketplace Plan"  Check that box, then on the next screen select your business and the months your business operated and it will put your insurance and the Premium Tax Credit that you have to pay back in the Self-Employed Health Insurance section, instead of the Itemized Medical Expense section as long as you qualify for the SE Health Insurance Deduction.

Please note, the premiums cannot create a loss, so it can only be deducted up to the amount of your profit.   

Self-employed health insurance deduction. 

Also, if you qualify for the deduction last year and did not receive it you can Amend Your Return to add in the expenses for your health insurance as a business expense.  It does take 16 to 20 weeks for the IRS to process amended returns, however, if you qualified for the deduction last year and did not get it, you would get a refund for the money after they processed your amended return. 

[socalgalish]

Thanks so much for the response. I did exactly as you said, entered all the 1095-A information, but the next screen was a recap, which is where it had entered it as medical expenses (and the Affordable Care Act line was zero). Perhaps I need to push through until the end to see what happens. My net Schedule C is fine to be able to claw all of the premiums back as an SE HI deduction, so it definitely should be there. I'm also curious what it'll do with the APTC repayment, which should be added to the SEHI deduction because it becomes part of my SE HI premiums paid.... and hence added to the deduction. The whole ACA APTC issue has been a dumpster fire on TT since the first year. I will look into asking about amending the past few years. That's a good idea. Thanks. What galls me is that I can no longer get through to anyone at TT unless we buy this ridiculous Live assistance package.   

[Vanessa A · Accepted solution]

Are you itemizing your return for mortgage interest, taxes paid, etc?  If you are and you did not check the box for the 1095-A self-employment, you may need to delete the 1095-A and go out, then go back and re-enter it to make sure it goes to the right spot.  Even if you are not, it may be something stuck in the memory keeping it there, so deleting the 1095-A, getting out of the return and then back into it should fix it either way.

The premiums credit you repay, generally should not be added to your SE Health Insurance premiums as you did not pay them in 2023. This means, you would take the deduction in 2024 when you file your taxes as that will be the year that you actually pay the amounts (with your taxes).  So when you file your taxes next year, remember to include the premiums repaid with your taxes filed this year. 

There is the circular method, that you can use as well.  The IRS has 2 different recommendations.  You can use the Simplified Calculation Method or the Iterative Calculation Method. TurboTax does not easily support using either one of these methods, so you must take a few more steps. Before I responded to the previous question, I attempted the method in this link, however, if you are itemizing your return, then when you unlink the 1095-A from the self-employment, it goes back to schedule A and there is no way to remove the deduction for the premiums which causes a double deduction which is not allowed. So you do NOT want to do that IF you are itemizing.  The fact that you are telling me it is going to Schedule A makes me think you are itemizing, so again, neither of these methods will not work in TurboTax if you are Itemizing since the program does not allow for the removal of these premiums. 

If you are taking the standard deduction, then you can claim them based on either of the 2 other approved methods from the IRS, you can claim the premium tax credit repayment this year by unlinking the 1095-A from your self-employment and then manually enter the premiums you paid plus the amount you are having to repay as self-employed health insurance.  In this situation, you could claim your repaid premiums this year as this is one of the exceptions to take the deduction in the year you paid rule. 

(Edited 3/6/24 @9:34AMPST) @socialgalish

[VolvoGirl]

SE Health Insurance doesn't actually show up on Schedule C.  Self-employed health insurance deduction goes on Schedule 1 line 17 (which goes to 1040 line 10), as long as the expense is not greater than your net self-employment income. If it does exceed your net self-employment income it gets split automatically. An amount equal to your net self-employment income goes on Schedule 1 and the remainder gets added in to medical expenses on Schedule A. It will not reduce any SE Tax on a net profit. It just reduces your AGI. 

[socalgalish]

@VolvoGirl  Thanks for the response... I worded my query badly...but you have clarified that.

[socalgalish]

@Vanessa A  Oh my! You are first person (of many) to indicate that the repayment is moved to next year! I have had no end of explanations about the circularity  of deducting repayments that then bring the AGI below the threshold to have to repay APTC.... etc... So next year, I would take the SE HI deduction as usual (assuming no more APTC repayments AND add the 2023 repayment (paid this year) to the SE HI deduction? 

[Vanessa A]

Correct. The technical rule is that premiums are deductible when you pay them.   This means, since you are not technically paying them until 2024, you would not deduct them until you file your 2024 return as a cash basis taxpayer. So yes, take the deduction as usual for the premiums you pay next year and then add any repayment to next year.  That will be the easiest way to do it.

There is the circular method, that you can use as well.  The IRS has 2 different recommendations.  You can use the Simplified Calculation Method or the Iterative Calculation Method. TurboTax does not easily support using either one of these methods, so you must take a few more steps. Before I responded to the previous question, I attempted the method in this link, however, if you are itemizing your return, then when you unlink the 1095-A from the self-employment, it goes back to schedule A and there is no way to remove the deduction for the premiums which causes a double deduction which is not allowed. So you do NOT want to do that IF you are itemizing.  The fact that you are telling me it is going to Schedule A makes me think you are itemizing, so again, neither of these methods will not work in TurboTax if you are Itemizing since the program does not allow for the removal of these premiums. 

If you are taking the standard deduction, then you can claim them based on either of the 2 other approved methods from the IRS, you can claim the premium tax credit repayment this year by unlinking the 1095-A from your self-employment and then manually enter the premiums you paid plus the amount you are having to repay as self-employed health insurance.  In this situation, you could claim your repaid premiums this year as this is one of the exceptions to take the deduction in the year you paid rule.