Where do I enter ACA Health Insurance Premium Rebate as income when filing Schedule C vs. A?

[kac42]

In 2023, I received a Premium Rebate from my healthcare provider for premiums paid in 2022 due to the "80/20" rule.  In 2022, I deducted healthcare premiums (after premium tax credits) as a business expense on Schedule C, and I did not file a Schedule A -- nor am I filing one for 2023.  I believe I should account for this rebate as additional income.  In the post below, it says to do this on Schedule A, but this is not applicable in my case since I did not deduct the expense on Schedule A the previous year.  Rather, it seems like this should be reported as business income on Schedule C.  The most logical place I can see to do this is Schedule C line 6 Other Income.  Is this correct?

Similar post from 2021:  https://ttlc.intuit.com/community/taxes/discussion/do-i-have-to-include-as-income-the-health-insuran...

[KrisD15]

Yes, claim the recovery the same way you claimed the expense.

If you claimed the expense on your Schedule C, claim the rebate as income. List it as "Miscellaneous" and name it "Premium Rebate" so the IRS will understand if they look at the return. 

According to the IRS:

"A recovery is a return of an amount you deducted or took a credit for in an earlier year. The most common recoveries are refunds, reimbursements, and rebates of itemized deductions. You may also have recoveries of nonitemized deductions (such as payments on previously deducted bad debts) and recoveries of items for which you previously claimed a tax credit."

"Total recovery included in income. If you recover an amount that you deducted in an earlier year when you were figuring your AGI, you must generally include the full amount of the recovery in your income in the year received."

[kac42]

I believe the answer you gave me is INCORRECT.  For 2024, I received a premium rebate of $242.  If I do as you say and include that as miscellaneous income on Schedule C, my AGI goes up by $1201 due to the snowball of self-employment tax, healthcare premium tax credit, qualified income deduction, etc.; and I end up owing $251 more in taxes to the Feds + $41 more to Colorado.  That makes absolutely no sense! 

This isn't actually income, it's a reduction in the healthcare premium -- and as I'm finding out there's a big difference.

You said I should "claim the recovery the same way you claimed the expense".  The only way I can see to do that is to alter the data entered in Form 1095-A, for example reduce the premium paid by $242 for the month when I received the rebate.  I **think** that ripples through the return correctly, I end up owing an additional $43 Federal and $8 Colorado.  But I'm not at all sure if this is the correct way to account for this, and changing the 1095-A values makes me nervous.  

What is the correct way to handle this?