Can I deduct my health insurance premiums, if I made more money than expected, self employed, and have to pay back the tax credit that I received through the marketplace?

[kirsten1]

I bought health insurance via Covered California and received the monthly advance payment of premium tax credit.  I made a lot more money and don't qualify for this credit, so I have to pay it back.  Can I still deduct the premiums from my income?

[CarolC · Accepted solution]

Yes.  You can deduct your health insurance premiums and the repayment amount you paid.

The IRS states, any repayment of the Advance Premium Tax Credit is considered to be a premium payment in the same tax year.

Click this IRS link Publication 502, Medical and Dental Expenses (Including the Health Coverage Tax Credit) for more information.  Scroll down to Premium Tax Credit.

[jdhoff]

To clarify, does this means the deduction for the repayment is to be applied in the year the credit was given or the year the repayment was made?

[CarolC]

@jdhoff You will deduct the repayment in the tax year the APTC was given.

[dbarkan2]

Does this also apply to self employed individuals? Would a repayment of the premium tax credit be added to the self employment health insurance deduction on Line 29 of Form 1040?

[txhomeventures]

Can anyone confirm/answer this last comment regarding self employed and line 29 of 1040?

[lboris845]

Does this apply if your company doesn't offer health insurance and you had to buy it on your own?

[dbarkan2]

What if your business had a net loss? Can you still deduct your insurance expenses?

[VolvoGirl]

Only if you Itemize on Schedule A.
Self-employed health insurance deduction goes on Form 1040 Schedule 1 line 29, as long as the expense is not greater than your net self-employment income. If it does exceed your net self-employment income it gets split automatically. An amount equal to your net self-employment income goes on Form 1040 Schedule 1 line 29, and the remainder gets added in to medical expenses on Schedule A.
 

[charlainemazzei]

Still waiting on an answer of whether a self-employed person can deduct the premium repayment on schedule C, Line E.6.a, Self-Employed Health Insurance payment.

[kirsten1]

Yes you sure can.  I actually made too much money and had to pay back my Californiacare subsidy but Turbotax automatically deducted it from my income.  Wait until you get to the Health Insurance section.  Once I filled that in, I went back and saw that it was deducted.

[delff]

Not sure why but my repayment was split between self insurance premium and medical expenses although the total expense (ie repayment) was far from being greater than my net self employment income. Any explanation?

[CathyHC]

Hi--We also went over the amount due to having an increase in income the last few months of the year. Our accountant says we have to pay back the overage with our tax return (we got extension). We are self-employed as a S Corp and the insurance expense is included each year as part of salary we are taxed on. Can we still deduct the premium we paid plus the extra $$$ we have to pay? Seems like it would just be a high penalty otherwise. Thanks.

[hicksbkpg]

What if deducting the repayment as a self employed health insurance deduction causes the MAGI to drop below the 401% income limit?  For example, when I deduct the repayment of the APTC as a self-employed health insurance deduction in the same year, this changes the MAGI to less than 401% of the poverty line, which changes the repayment amount, which changes MAGI, which changes the repayment amount, etc. etc.  There is a circular reference here that cannot be solved, and I've never been able to find any IRS guidance on this matter.  Any help?

[Critter]

You are correct in that circular issue. The correct way to handle it is to make the adjustment once and ignore the change in the bottom line. Otherwise you'll be going in circles till the cows come home. The program should handle this automatically for you, let it.