Carryforward of APTC repayment

[mill6210]

Hello,

On my 2023 return, I had to repay some APTC. In that year, I didn't have enough Schedule C income against which I could label this entire repayment as 'health insurance deduction' on Form 1040 Schedule 1. The balance was applied by Turbotax to Medical Expenses in Schedule A. But since I didn't itemize, the allocation of some of the APTC repayment to Medical Expenses on Schedule A was basically an unused deduction.

My questions are: (a) Is this correct? After Schedule C taxable income is brought down to zero by applying APTC repayments, we just hope/pray that we itemize so that the amount applied to the Medical Expenses deduction on Schedule A isn't lost by taking the standard deduction? (b) Is there ever a situation where APTC repayments in excess of Schedule C income can be carried forward to future years when there is a schedule C profit?

[Mike9241]

a) yes that's correct.. once schedule C income is reduced to zero any additional APTC payments become a Schedule A medical expense. for this to be of any benefit 1) medical expense must exceed 7.5% of adjusted gross income and 2) your itemized deductions need to exceed your standard deduction

b) there is no current provision to carry forward (or back) excess credits. each year stands on its own. 

[mill6210]

Thank you! That is my understanding as well. But...I did have a CPA mention that APTC repayments are considered to be on a 'cash basis'. By this, they meant that, for example, 2023 APTC repayments actually happen in 2024, and for that reason, they can be considered "Self-Employed Health Insurance Premiums" for the 2024 tax year.  Has anyone every heard whether this is true?

[mill6210]

Here is the answer, for those interested:

Contrary to the general rules for cash basis taxpayers, and based on the example in Pub 502, the deduction for APTC repayment will go to the year of the credit and not the year in which the credit is repaid. This means that if the APTC repaid is significant enough and had not been claimed in the year the APTC was granted, the prior year return must be amended to claim the additional health insurance deduction. (2016 IRS Pub 502, Page 13)