Advance Payment of Premium Tax Credit. My income exceeded the eligibility threshold for this. In adjusting this on my return, it becomes a tax liability. But my benefit was only a reduction in insurance premium, which is income related benefit. So, my income should be increase by the adjustment of the credit instead of my tax. Please explain how I handle this.

[rjs]

TurboTax is handling it correctly, as required by the IRS. You have to repay the Advance Premium Tax Credit that was paid to the insurance company on your behalf. The repayment is part of your tax liability. The fact that the amount of the credit was based on your income does not mean that it is an adjustment to your income. For more details see IRS Publication 974, Premium Tax Credit (PTC), which you can download from the first link below. You may also want to look at Form 8962 and it's instructions, at the other two links.

Publication 974, Premium Tax Credit (PTC)

Form 8962 Premium Tax Credit

Instructions for Form 8962, Premium Tax Credit (PTC)

[Critter · Accepted solution]

Ok ... let me see if I can explain it ... when you take ACA insurance you have the option to take the credit in advance  OR   wait until you file your return to take it   OR   take some now and some later.  

Since you took the credit in advance and your income exceeded what was allowed you must simply pay back the credit you were not entitled to on line 46 of the new Sch 2.  

This means you paid more in insurance premiums out of pocket  and as such you can use it on the Sch A if you itemize deductions or if you are self employed on the adjustment to income on line 29 of the new Sch 1.    It is not added to your income and will not balance out the credit payback. 

[mpsingh08]

How do I get the tax credit adjustment to reflect on Line 70 of Schedule 5? TurboTax is not doing it automatically.

[mpsingh08]

The Advance Payment of Premium Tax Credit would become a tax liability if I did not qualify for it. But it should also be reflected on Schedule 5 as a tax payment on Line 70. TurboTax is not doing that automatically. Why?

[Critter]

Sorry ... excess credit payback is on Sch 2 line 46   NOT  Sch 5 line 70.

[rjs · Accepted solution]

It is not a tax payment. As Critter said in her latest post, she was mistaken when she said that the amount you have to pay back is on line 70 of Schedule 5. The amount you have to pay back appears as a tax on Schedule 2 line 46.

If you were entitled to a higher premium tax credit than what you received in advance during the year, the additional credit would be on Schedule 5 line 70. But that is not your situation. You either get an additional credit on Schedule 5 line 70, or you have to pay back part or all of the credit on Schedule 2 line 46. There would never be entries on both of those lines. In your case, the amount you have to pay back is on Schedule 2 line 46, and Schedule 5 line 70 is blank.

This will be clear to you if you look carefully at Form 8962 lines 24 through 29.

[mpsingh08]

Thanks for your guidnce and help. I was confused, thinking that the reversal of Advance Payment of Premium Tax Credit was a tax. I am impressed and amazed by your knowledge and selfless commitment to helping people like me. Bless you. Keep up the good work.