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?
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.
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.
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?
@jdhoff You will deduct the repayment in the tax year the APTC was given.
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?
Can anyone confirm/answer this last comment regarding self employed and line 29 of 1040?
Does this apply if your company doesn't offer health insurance and you had to buy it on your own?
What if your business had a net loss? Can you still deduct your insurance expenses?
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.
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.
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.
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?
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.
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?
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.
can you explain this more? turbo tax is splitting my repayment of the tax credit and applying $504 to the self employed health insurance and the rest to my medical but i want it to apply all of it to the self employed health insurance . When I over ride it my agi goes below the level and I don't owe it anymore and turbo tax is giving me back part of it so then I can't claim it. If I let tt split the amount like it is doing then I owe $16k. I am not sure how to handle it. I have played with the numbers and I can't figure it out.
The answer depends. Unfortunately, I cannot advise any further than to provide you with the tools to calculate your alternatives on the following worksheets. The following resource is exactly what you need to determine what to enter. Once you have that number, then you can proceed with reporting it.
See 2019 IRS Publication 974 Premium Tax Credit (PTC) page 56 Self-Employed Insurance Deduction and PTC which begins:
Self-Employed Health Insurance Deduction and PTC This part provides special instructions for figuring the self-employed health insurance deduction and PTC if you or your spouse was self-employed, you or a member of your tax family was enrolled in a qualified health plan in 2019, and you may be eligible for the PTC. Because the amount of the self-employed health insurance deduction may affect the amount of the PTC, and the amount of the PTC may affect the amount of the deduction, a taxpayer who may be eligible for both may have difficulty determining the amounts of those items. A taxpayer who may be eligible for both may follow the instructions in this part to determine amounts of the self-employed health insurance deduction and PTC that are allowable under the law.
Using the special instructions in this part is optional. If you are eligible for both a self-employed health insurance deduction and the PTC for the same premiums, you may use any computation method that results in reporting amounts that satisfy the rules for both the deduction and PTC, as long as the sum of the deduction claimed for the premiums and the PTC computed, taking the deduction into account, is less than or equal to the enrollment premiums.
Additional Resources for reference:
2019 Form 8962 Instructions and 2019 Form 8962
2019 Form 1040 Schedule 1 Instructions begin on page 81 and 2019 Schedule 1
Question regarding repayment of ACA:
We repayed the entire outstanding premuim amount for 2018 when we filed out 2018 taxes because our income went over the limit. How do we deduct the $22,000 repayment when doing the 2019 returns. We had to repay because income was too high; if it was deducted, then income went down below limit negating the repayment. Makes no sense. One accountant said it should be deducted in this year's taxes as a medical expense. Another says we should redo 2018 taxes. IRS info is unclear and there is NO information to be found online outside of this. IRS pub says repayment could be medical expense for that year (2018).
Anyone know anything about this? Filed a return when you did repayment?
If you had to pay back the 2018 advance credit that payback goes on the 2018 return which then allows an adjustment to income for the SE health Insurance deduction depending on the income from the SE ... any unallowed deduction is then moved to the Sch A by the program automatically to be used only if you itemize deductions. NOTHING is reported on the 2019 return ... that is how the rules are written for this situation. Review the 2018 return ... did the program calculate it correctly ? If not you need to amend the 2018 return.
It's the same issue someone else had from last year: the repayment is calculated based on income. If you deduct the repayment (which you would not yet have paid until you file), the MAGI goes below the limit saying you own nothing. Our CPA last year could not do that. It's not like you write out a check to the insurance company, then take the deduction. The repayment is based on the MAGI going over the income limits. That's where the confusion is coming from--and I've talked and met with 4 different CPAs and gotten no answer or different answers. Very frustrating!
This is how it is handled in layman's terms ... I could site the IRS rules and instructions however your head will probably explode ... I have been doing taxes and teaching the tax courses for more than 25 years so here is the answer again ...
If you had to pay back the 2018 advance credit that payback goes on the 2018 return which then allows an adjustment to income for the SE health Insurance deduction depending on the income from the SE ... any unallowed deduction is then moved to the Sch A by the program automatically to be used only if you itemize deductions. NOTHING is reported on the 2019 return ... that is how the rules are written for this situation. Review the 2018 return ... did the program calculate it correctly ? If not you need to amend the 2018 return.
I have this same dilemma. My income was high enough this year that I didn't qualify for the premium tax credit and had to pay it back. I think revised my health insurance payments on Schedule C and saved myself $1200. I consulted with Turbo Tax and this is the correct way to do it. I entered the information on my 1095 A under Medical in the Personal section. I hope this helps.
If you don't itemize shouldn't the amount you have to pay back go to your se health insurance
If you enter the 1095-A in the deductions section as directed by the program then the amount you end up paying out of pocket will be listed as an adjustment ... just enter the info ONCE by following the screen instructions carefully then review the return carefully later.
Everyone has answered here regarding when you OWE money. But what if your subsidy wasn't enough, so now you're RECEIVING money on form 8962 as a Net Premium Tax Credit?
Do you have to subtract that amount from your Self-Employed Health Insurance deduction?