Re: Can I take both self-employed health insurance...
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Level 3

Can I take both self-employed health insurance deduction and PTC for the same premiums?

I have 100% owned S.corp and have been taking self -employed health insurance deduction on schedule 1. The health insurance is purchased through marketplace, which I get 1095 A for PTC.

My income for this year is very low, so it looks like I can have the maximum PTC. 

I tried on turbotax and it actually allowed me to take both.

 

 Can I take both deduction and PTC? Thanks!

 

 

13 Replies
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Level 6

Can I take both self-employed health insurance deduction and PTC for the same premiums?

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Level 6

Can I take both self-employed health insurance deduction and PTC for the same premiums?

Now reading the question again ... you did not mention if you were taking a paycheck and issuing yourself a W-2 at the end of the year as you must do as an S-Corp owner who works the business.  Not taking a wage is the fastest way for an S-corp to be audited .  See the info here for the health insurance FAQs...

 

https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical...

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Level 3

Can I take both self-employed health insurance deduction and PTC for the same premiums?

 

Yes, I have been taking wages and issuing W2 and adding premium payment on Box1 on W2.

I don't understand what you mean "NOT  on the same dollars"

For instance, I paid $12000 for health insurance and then I reported the amount on box 14 other. So this amount $12000 can not be changed. I put all numbers from 1095 A, then PTC is calculated automatically.  Therefore, it seems impossible to claim the difference of SEHI and PTC  for SEHI deduction.

Or am I not understanding this at all?

Thank you for your kind advice!

 

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Level 6

Can I take both self-employed health insurance deduction and PTC for the same premiums?

I cancelled my original answer ... my mind is fuzzy ... need a nap.

 

@dmertz   @HACKITOFF  @Hal_Al 

 

Can anyone chime in ?

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Level 6

Can I take both self-employed health insurance deduction and PTC for the same premiums?

Per the IRS link : 

Treating Medical Insurance Premiums as Wages

Health and accident insurance premiums paid on behalf of a greater than 2-percent S corporation shareholder-employee are deductible by the S corporation and reportable as wages on the shareholder-employee’s Form W-2, subject to income tax withholding. (A 2-percent shareholder is someone who owns more than 2 percent of the outstanding stock of the corporation or stock possessing more than 2 percent of the total combined voting power of all stock of the corporation.)

 

However, these additional wages are not subject to Social Security, or Medicare (FICA), or Unemployment (FUTA) taxes if the payments of premiums are made to or on behalf of an employee under a plan or system that makes provision for all or a class of employees (or employees and their dependents). Therefore, the additional compensation is included in the shareholder-employee’s Box 1 (Wages) of Form W-2, Wage and Tax Statement, but is not included in Boxes 3 and 5 of Form W-2.

 

A 2-percent shareholder-employee is eligible for an above-the-line deduction in arriving at Adjusted Gross Income (AGI) for amounts paid during the year for medical care premiums if the medical care coverage was established by the S corporation and the shareholder met the other self-employed medical insurance deduction requirements. If, however, the shareholder or the shareholder’s spouse was eligible to participate in any subsidized health care plan, then the shareholder is not entitled to the above-the-line deduction.  IRC § 162(l).

Health Insurance Purchased in Name of Shareholder

Insurance laws in some states do not allow a corporation to buy group health insurance when the corporation only has one employee. Therefore, if the shareholder was the sole employee of the corporation, then the shareholder has to purchase health insurance in his own name.

 

Notice 2008-1 provided rules by which a 2-percent shareholder would be allowed an above-the-line deduction even if the health insurance policy was purchased in the name of the shareholder. Notice 2008-1 provided four examples, including three examples in which the shareholder purchased the health insurance and one in which the S corporation purchased the health insurance.

 

Notice 2008-1 states that if the shareholder purchased the health insurance in his own name and paid for it with his own funds, the shareholder would not be allowed an above-the-line deduction. On the other hand, if the corporation obtains and pays for health insurance in its name, covers the shareholder under the policy, and reports the premiums as W-2 wages to the shareholder, then the shareholder is allowed an above-the-line deduction.  Similarly, if the shareholder purchased the health insurance in his own name but the S corporation either directly paid for the health insurance or reimbursed the shareholder for the health insurance and also included the premium payment in the shareholder’s W-2, the shareholder would be allowed an above-the-line deduction.

 

The bottom line is that in order for a shareholder to claim an above-the-line deduction, the health insurance premiums must ultimately be paid by the S corporation and must be reported as taxable compensation in the shareholder’s W-2.

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Level 6

Can I take both self-employed health insurance deduction and PTC for the same premiums?

 

 

Read these screens in the program carefully ... entering in the wrong place or incorrect order will mess you up...

 

 

K-1 insurance.PNG

 

 

 

 

K-1 insurance.PNGK-1 insurance 2019.png

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Level 15

Can I take both self-employed health insurance deduction and PTC for the same premiums?

You are not permitted a self-employed health insurance deduction for any portion of your health insurance premiums covered by PTC.  Because PTC depends on AGI and AGI depends on the self-employed health insurance deduction, TurboTax performs an iterative calculation to determine both of these values together.

 

On the Self-Employed Health Insurance page that Critter-3 showed, enter only your Medicare wages.  Leave the box for Premiums you Paid Personally blank.  On the page in the Form 1095-A section that asks you to Let us know if any of these situations apply to you, mark the box to indicate that "I'm self-employed and bought a Marketplace plan."  (For the purpose of the self-employed health insurance deduction only, you considered self-employed.)  On the next page, indicate that the Income was from the S corp and indicate the months of coverage.  TurboTax will perform the iterative calculation to determine the amount of your PTC and the amount to include on Schedule 1 line 16.

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Level 3

Can I take both self-employed health insurance deduction and PTC for the same premiums?

So what do you suggest?

I have very low income this year ($50,000 for family of 3) If I can't utilize both SEHI deduction and PTC, claiming PTC only will give me a higher tax refund? According to my calculation, I get $4400 more refund than taking SEHI deduction.  Thank you very much for all replies!

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Level 15

Can I take both self-employed health insurance deduction and PTC for the same premiums?

Claiming the SEHI deduction for the portion of your health-insurance premiums not covered by PTC would decrease your AGI and could increase the amount of PTC for which you are eligible.  That's why TurboTax needs to do the iterative calculation.  Without knowing your AGI without any SEHI deduction, your filing status, the amount paid for health insurance, the amount of the monthly second lowest silver plan premium and the amount of Advance PTC you receive, it's impossible to know the best approach to take.

 

Getting a refund of $4,400 more if you don't take the amount of SEHI for which you are eligible after factoring in PTCs suggests that you are entering something incorrectly.  Since taking an SEHI deduction lowers your AGI, so it's hard to imagine how not taking the SEHI would produce a greater refund than taking a combination of an SEHI deduction and PTC, unless, perhaps, your AGI is really low and you receive no Advance PTCs.  However, I don't see how your AGI could be that low with $50,000 of income.

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Level 6

Can I take both self-employed health insurance deduction and PTC for the same premiums?

The endless circle of PTC to SEHI to PTC etc is like looking into a mirror with a mirror behind you ... it is never ending.  So I was taught to compute the return without the SEHI deduction then look to see which way the PTC computed then using that make the SEHI deduction and STOP.  Do not keep looking back and forth since you will never end the calculations and this is fine with the IRS.  

 

 

If you did not take any of the advance credit an increase in the refund could be $4K or more ... review the entire return carefully before filing ... remember that you sign the return under oath that it is true, correct and complete. 

 

1040.jpg

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Level 15

Can I take both self-employed health insurance deduction and PTC for the same premiums?

Calculating the PTC and then taking as a SEHI deduction whatever portion of health insurance premiums paid that was not covered by the PTC is potentially, but not necessarily acceptable (particularly if no Advance PTC was received and AGI is below 100% of the federal poverty line), but would also usually not produce the maximum tax savings.

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Level 3

Can I take both self-employed health insurance deduction and PTC for the same premiums?

Wow, thank you so much for all of your kind advices!

I didn't take any advance credit. I followed all instruction carefully as noted above, now I got very interesting number hoping I am right...

My annual total heath insurance premium on 1095 A was $10,800 (annual silver plan premium $12,324). Finally, I got sch1 -line 16 $4591 and PTC $6209 totaling $10,800. 

Can anyone tell me if I did right this time?

Another interesting thing is taking PTC and SEHI (amount not covered by PTC) gave me the best result. 

BTW, I am doing this for 2020 year trying to figure out if I should get HI premium payment reimbursed by my S.corp at the end of year. I have exceptionally low income about $57,000 this year. (married filing jointly with one dependent) I thought initially I could take only one of SEHI deduction or PTC. After I tried on Turbo tax, I realized taking only PTC give me more refund than taking only SEHI deduction. So I thought I shouldn't get reimbursed for HI by S. Corp.

So far what I can tell is it would be better to get HI premium reimbursed by S.corp and take both HI deduction and PTC. 

I hope I understood correctly....

Thank you so much!

 

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Level 6

Can I take both self-employed health insurance deduction and PTC for the same premiums?

The program is absolutely correct and shows what we have been talking about all along.  

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