Can I deduct the Excess Advanced Premium Tax Credit repayment that I must pay, like the way ACA premiums are deductible?

[david9821]

When I give my 2021 tax software a spin, it looks like it deducts the ACA premiums you paid during the year, (if you're going to itemize). The tax software calculates that for you.  It also calculates the Excess Advance Premium tax credit repayment (Schedule 2 line 2). This is what you have to pay back if you make more than anticipated and have to return some or all of the ACA subsidy. This is fine. But it does not also add this calculated amount to your medical expense deductions.   This is really just ACA premiums but paid late by you. Technically it was paid during the year for you and so are now paying the government back for doing so - much like you are paying a credit card. The software should throw the amount into your medical deductions. Why doesn't it?  The instructions for TurboTax 2021 are pretty clear.  Don't include premiums for an ACA plan. Clearly the tax software would double that as it figures that out for you from your 1095A. It also figures out that Excess Credit amount. Shouldn't the software throw that into the deductions?  My reputable tax advisor says I need to include it.

[AmeliesUncle]

Yes, you deduct the 'net' amount that you end up paying for insurance.

I thought the program did that automatically (I KNOW it does if you are self employed and you check the self employed box after entering the 1095-A).  So be extra sure it is not doing it automatically before you add it again.

But be aware that unless you are self employed, medical deductions are subject to severe restrictions as an Itemized Deduction, so it may not actually reduce your taxes.

[david9821]

Thank you but the program did not handle this automatically. I investigated this several ways. I think it is a TurboTax bug. I hope someone at TurboTax would address this or get back to me about it. Looking on the internet I can't find articles about this case

[longtime76]

Replying to an old post - but as someone self-employed, I'm concerned TT isn't doing this calculation as it was never explained in the inputs to TT.  I had a significant pickup in income in the back half of the year under a W2 and employer coverage, and thus have a material repayment from the first 6 months under self employment.  Has this been fixed in the 2024 version?   

[MonikaK1]

You can enter the health insurance premium assistance you paid back as medical expenses.

From IRS Publication 502:

• You can't include in medical expenses the amount of health insurance premiums paid by or through the premium tax credit. 
• You also can't include in medical expenses any amount of advance payments of the premium tax credit made that you did not have to pay back. 
• However, any amount of advance payments of the premium tax credit that you did have to pay back can be included in medical expenses.

Example 1.

You are under age 65 and unmarried. The cost of your health insurance premiums in 2024 is $8,700. Advance payments of the premium tax credit of $4,200 are made to the insurance company and you pay premiums of $4,500. On your 2024 tax return, you are allowed a premium tax credit of $3,600 and must repay $600 excess advance credit payments (which is less than the repayment limitation). You are treated as paying $5,100 ($8,700 less the allowed premium tax credit of $3,600) for health insurance premiums in 2024. You will enter $5,100 on Schedule A (Form 1040), line 1.

Example 2.

The facts are the same as in Example 1, except you are allowed a premium tax credit of $4,900 on your tax return and receive a net premium tax credit of $700. You are treated as paying $3,800 ($8,700 less the allowed premium tax credit of $4,900) for health insurance premiums in 2024. You will enter $3,800 on Schedule A (Form 1040), line 1.

@longtime76 

@david9821