How do I take just part of the self-employed health insurance deduction

[user17724669799]

My husband and I are largely retired although I have roughly $5000 of self-employment income and we have roughly $100K of taxable income from Traditional to Roth IRA conversions. We have enough self-employed health insurance deductions to zero out my income and that's what Turbotax Deluxe is doing.  Rather than deduct all the expenses, we'd like for there to be some net income to allow a Roth IRA contribution (which we've already made).

How do I tell Turbotax that I don't want to deduct all of the self-employed health insurance expenses?

Note we've entered the Roth contribution but Turbotax isn't using that information to reduce the deduction or even to flag that there's an inconsistency when it checks the return.

[dmertz]

"Note we've entered the Roth contribution but Turbotax isn't using that information to reduce the deduction or even to flag that there's an inconsistency when it checks the return."

That's correct behavior because the Roth IRA contribution does not reduce the amount that you are eligible to claim as a self-employed health insurance deduction.  The same compensation can be used to support both because the Roth IRA contribution is nondeductible.

[dmertz]

Corrected my previous post to say "self-employed health insurance deduction" instead of "self-employed retirement contribution" that I had mistakenly originally typed.

[user17724669799]

I think that would be correct if my income were higher but with low earned income we're kind of in the opposite situation.  The self-employed insurance deduction reduces my income down to zero and my understanding is that you can't contribute more than your net earnings to a Roth IRA.

We actually got bitten by this last year.  Turbotax didn't flag anything but the IRS made me remove money from the Roth IRA because my contribution exceeded my net income.

[ThomasM125]

You enter your self-employed health insurance premiums when you enter your business expenses on the screen that says Your (name of business) Business. Look for the option that says Other Common Business Expenses under Business Expenses. On the next screen that says Let's write off some business expenses, choose the option that says Insurance payments. On the next screen choose Health Insurance Premiums and update that section to show no payment for health insurance. 

[dmertz]

"We actually got bitten by this last year.  Turbotax didn't flag anything but the IRS made me remove money from the Roth IRA because my contribution exceeded my net income."

Compensation available to support an IRA contribution (traditional or Roth) is net profit is reduced only by the deductible portion of self-employment taxes and the the deductible amount of self-employed retirement contributions.  See Self-employment income under What is Compensation? in IRS Pub 590-A.  The self-employed health insurance deduction does not reduce compensation for the purpose.

https://www.irs.gov/pub/irs-pdf/p590a.pdf

[user17724669799]

I should have noted that the health insurance was through an ACA exchange so it's entered explicitly from the 1095-A.  Apologies for leaving that out.

[ThomasM125]

Per @dmertz, the self-employment health insurance deduction should not affect your IRA contribution, as it does not affect earned income. However, if you want to try it you would follow these instructions:

Since you entered a Form 1095-A, TurboTax will ask you if the insurance is associated with self-employment income. If you did not pay the insurance premiums from your self-employment income, you can answer "no" to that question and then your insurance premiums will not be deducted for the self-employed health insurance deduction. However, that may affect your insurance premium tax credit if you have one. You will see a screen that says Self Employed with Marketplace Plan? in the Medical section and then Affordable Care Act (1095-A). The question is are you self-employed and purchased a Marketplace plan. Answer "no" to that question.

[user17724669799]

Thanks for the note and the link.  After looking through the document I think there's a further restriction for Roth IRA contributions that we're running to.  On p40 of the copy I just downloaded, it says for Roth IRAs "your contribution limit generally the lesser of: $7,000 ..., or Your taxable compensation".

This tracks with the IRS making us pull back part of my Roth IRA contribution last year.

[user17724669799]

Thanks, the approach you detailed keeps the ACA premiums from being deducted.  I can then enter the desired partial ACA premium deduction as a self-employed health insurance expense.

I didn't receive any ACA tax credit so I think this is clean for us!