Why is my self employed health insurance deduction (Sch 1, line 29) a small fraction of my Obamacare premiums paid? (I do not qualify for Premium Tax Credit.)

[Questioner]

I have both W2 and self employed 1099-MISC income.  I bought Bronze health insurance and dental insurance on the ACA exchange and had no insurance offered by an employer.  Even after maxing out IRA, SEP, etc., my AGI is still a few $K too high to qualify for any Premium Tax Credit (PTC).   Therefore it seems fair that I should be able to list 100% of my dental and Obamacare premiums paid on Sch 1 line 29 as an "above the line" deduction.  Instead, TT populates line 29 with data from the Health LTC Wks, which adds the dental insurance premiums paid to a mysterious amount declared in a text statement at the very bottom of that worksheet.  The statement says "A self-employed health insurance adjustment of $$$$ from premiums paid through an exchange is included as an adjustment to income but does not appear on these worksheets."  This $$$$ amount is less than 7% of my premiums paid. How is this amount calculated?  Why don't all my health and dental premiums go to line 29?  If I pretend that I did not get a Form 1095-A, and bought health insurance from somewhere other than the ACA exchange, then the entire sum of the premiums goes on line A1 of the Health LTC worksheet and carries over to Sch 1 line 29. In this scenario, there is no mysterious text declaring "an adjustment to income that does not appear on the [Health LTC] worksheets." This scenario gives a much bigger refund!  Can anyone explain why I am penalized based on who I bought the insurance through?

[dmertz]

Did you receive any Advance Premium Tax Credits?  If so, is your repayment of those credits limited?  Examine Form 8962 Part III.

[Questioner]

I appreciate your attempt to help.  Thank you.  Nonetheless, I neither requested nor got any advance PTC. Form 8962 Part III is totally blank, and Form 1095-A lines 21-33 Column C are all zeros - both as expected.

[Vanessa]

What is your profit on Schedule C line 31?

[Questioner]

Schedule C, line 31 (net profit) is $59,992. On Sch 1:  line 27 (deductible part of SE tax) is $4,219.  ACA exchange Obamacare insurance premium was $18,120 and dental premium was $587.  Please see the comment below what is designated as "Answer" for additional details.

[Vanessa]

The answer is most likely going to be found between your Schedule C and Schedule 1.  

Your premium deduction cannot be more than your taxable income minus deductions from 1/2 self-employment deduction and SEP, SIMPLE and qualified plan deductions on Schedule 1.  Start by looking at line 31 of your schedule C.  This will tell you your net profit or loss.  If it is a loss, you cannot deduct anything.  If you show a profit, then this is the maximum amount you can deduct. However, this amount will be further reduced by the amount on line 27 of your Schedule 1.

Example.

Your total premiums paid were $10,000 but your net profit was $4,000 and 1/2 of your SE tax was $312, your self-employed health insurance deduction would be limited to $3,688.

[Questioner]

As best I can tell, the reply above does not explain my case, but I do appreciate the attempt!  Please try again to explain!  

Schedule C, line 31 (net profit) is $59,992. On Sch 1:  line 27 (deductible part of SE tax) is $4,219;  line 28 (self employed SEP) is $11,151; line 29 is $2,137; line 32 (IRA deduction is $13,000; and line 36 (sum) is $30,527.  I neither see nor understand how line 29 is computed.  Profit is much higher than premiums, even if I need to subtract half of SE tax, and SEP contribution - or even IRA contributions.  (Perhaps relevant: I have W2 wages and dividends to cover the line 32 IRA deductions. Form 1040 line 7 (AGI) is $70K.)

Here is another indicator that the limits postulated in the above reply do not explain my case:  if I pretend that I bought the health insurance from somewhere other than the ACA exchange, and did not get a Form 1095-A, then line 29 is the sum of my health and dental insurance premiums.

Thank you!

[Vanessa]

Are you itemizing expenses? What is on your schedule A line 1 if so?

[Questioner]

No, I am not itemizing expenses.  I confirm that Sch A is not among the "Forms in My Return" list on the left panel of TT.  

I did enter dental insurance premiums via "Business Income and Expenses" -> Edit Business Name -> Other Common Business Expenses -> Health Insurance Premiums.  Per instruction, I did not list Obamacare premiums paid through healthcare.gov, but did that as part of the "Health Insurance" step-by-step Q&A.  (I temporarily included the Obamacare premiums along with dental in my pretend scenario.)

Proactively providing more relevant info: I got a little bit of tax-exempt interest, which makes my modified AGI $70,766.  I have no foreign income.  Forms 2555 (dash T and dash S) are blank.  I have only one business, and I am its sole proprietor (self employed).  The Obamacare insurance is established under that business.

[rebsrogers]

Did you ever resolve this? I have the exact same issue and all I can see is that it is a Turbo tax glitch? 

[julianz-]

I have a very similar issue. Did anyone figure this out? Specifically, how does TT calculate the mysterious number printed as a foot note to the Health LTC worksheet saying "A self-employed adjustment of XXXX from premiums paid through an exchange  is included as an adjustment but does not appear on this worksheet". This number also populates 1040 Schedule 1 line 17 in a way that cannot be changed. The number TT is calculating is less than the premiums I paid even though my Schedule-C business has enough profit to more than cover the premiums. There was an advance payment of premium credit which I am having to repay but even if I subtract this amount from the premiums paid the amount is still higher than what TT is entering in Schedule 1 line 17 .

[VolvoGirl]

Only thing I can think of for everyone,  if you are married be sure the health ins or 1095A is assigned to the same spouse as Schedule C .

[julianz-]

I got the answer I was looking for from https://ttlc.intuit.com/community/tax-credits-deductions/discussion/self-employed-health-insurance-d....

Basically the number seems to come from adding up column A on form 1095-A.  I don't know why TT can't just say that. Would have save a lot of time and hassle if it did. I was confused because I had received some advanced payment of PTC (premium tax credit) which appears in column C which I have now had to pay back because my gross income was higher than expected. This repayment appears on line 17 on the 1040 via Schedule 2 line 2 and I wondered why am I not also getting tax credit for this extra payment? I think I am though because column A includes this extra payment I believe.

[NCperson]

the complexity with ACA and self-employment is that the premium is a deductible expense against other self-employed income, but the premium tax credit is dependent on the reportable income which is dependent on the ACA premium, so it is circular........

[julianz-]

Well I understand there is some iterative logic that is necessary sometimes but in my case this didn't really happen because all of the advance premium tax credit had to be paid back. This, in itself, was annoying because when I applied via the health insurance marketplace I thought I was getting a nice subsidy but turns out I got no subsidy in the end.  Seems like bait and switch to me but I am not blaming TT for that of course. 2020 was better because the government didn't ask for advanced PTC to be paid back.