Self-Employed Health Insurance Deduction (1040 sched 1 line 16) Unexplained Value

[taxes4739]

On Form 1040 Schedule 1 Line 16, TurboTax has generated a value that doesn't seem to come from anywhere.  To make the discussion easier, let's say the value listed here is $200.

If I right-click the value->About, it says to see the "Self-Employed Health and Long-Term Care Insurance Deduction Worksheet."  That worksheet (under Schedule C) shows a different (lesser) value on line 10, which is what it says it's supposed to be transferring to form 1040 sched 1 line 16.  To make the discussion easier, let's say the value listed here on this worksheet is $100.  $100 is a value that actually makes sense: it's what I've entered under Business->Business Income and Expenses->Other common business expenses->Insurance payments->Health insurance premiums.

If I go to the Business Income & Expenses screen, it shows this mysterious $200 value next to the "Self-Employed Health Insurance" line...but when I actually click the "Update" button, it says "We have deducted, from your income, $100 of allowable self-employed health insurance attributed to your schedule C).

In addition to the $100 entered per above, I also have some health insurance-related values entered via a 1095-A.

Where is it getting this mysterious $200 value, and why does it not properly explain where it's coming from?

[JulieS]

When you have ACA coverage that is also self-employed health insurance, you don't need to enter the amount of premiums paid in the self-employment income and expenses section. It sounds like you entered the amount you paid in both sections.

It is not prominent, but the following message appears in the Learn more notes in this section:

"Do not include health insurance purchased through a Health Insurance Marketplace (also known as an exchange). These premiums are entered on Form 1095-A in the program."
 

To fix this, just click on Step by Step in the upper right corner while you are on the Health LTC Wks in Forms mode. 

Click Update to the right of Health Insurance and then delete the entry. 

[taxes4739]

I didn't enter it in both sections.  The ACA coverage is entered only in 1095-A; there is an additional non-ACA health insurance premium (for supplemental global coverage while traveling abroad), which is what I entered in the other section.

[ThomasM125]

The issue here is when you have insurance through the exchange, you have to determine your allowable premium tax credit, which is based on your income. Your income has to factor in your self-employed health insurance deduction. However, you can't use the insurance deduction to the extent that it benefits you with regard to the premium tax credit.

So, you have to go through a complicated calculation to determine what your allowable self-employment insurance deduction is. Often, that results in a deduction that is less than your insurance premiums paid as reported on form 1095-A. So, the amount on line 16, schedule 1 represents your allowable self-employed insurance deduction, which is the product of a complicated calculation based on your income and the amounts reported on your form 1095-A.

[taxes4739]

In all other cases on my return, these "complicated calculations" are shown via a worksheet.  Where is the worksheet that shows how this calculation is performed (and thus, how the $200 value is derived)?

[DaveF1006]

It might be adding your premiums you pay that are recording from the 1095A in addition to the amount you recorded as a schedule C expense.

[taxes4739]

Nope, that's definitely not it.

[ThomasM125]

You can see how the self-employed health insurance deduction amount is being calculated on the "Self-Employed Health and Long-Term Care Insurance Deduction Worksheet" in TurboTax.

[taxes4739]

No, you can't - which is exactly what I addressed in my original question.  See the 3rd & 4th sentences:

The Self-Employed Health and Long-Term Care Insurance Deduction Worksheet "shows a different (lesser) value on line 10, which is what it says it's supposed to be transferring to form 1040 sched 1 line 16."

[ThomasM125]

OK, I see. Sorry for my lack of attention!

I ran up some numbers and noticed that there is a note at the bottom of the worksheet that mentioned that there are calculations that affect the deductible self-employed insurance amount that appears on schedule 1. And those calculations are not reflected on the self-employed health insurance worksheet. So, the numbers don't match because of the calculation I referred to earlier.

So, there is not a worksheet in TurboTax that you can view to determine how the deductible amount is calculated.

You can review the instructions to form 1040, however, if you want to verify the accuracy of the entry, as follows:

 https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

[taxes4739]

>>So, there is not a worksheet in TurboTax that you can view to determine how the deductible amount is calculated.

...Right, and that brings us right back to my original issue: the software is just spitting out numbers with no explanation of how it got them, and thus no way to actually check them.  Not really okay, as I'm the one who has to sign the tax return stating that it as accurate. How can I say I know it's accurate if they just output random black-box values...?

>>You can review the instructions to form 1040, however, if you want to verify the accuracy of the entry, as follows

I did actually (prior to posting this).  The instructions for Schedule 1 Line 16 don't provide any more insight into how they're arriving at that number.

[ThomasM125]

I did some more research and determined that you need to prepare the worksheet on page 57 of IRS publication 574 to determine your allowable self-employed health insurance deduction if you also have a premium tax credit. Here is a link to the publication:

https://www.irs.gov/pub/irs-pdf/p974.pdf

The worksheet looks like this:

You may have to complete worksheet W or X as well, and I believe that is why it does not show in Turbotax, as the basic worksheet would not be applicable to all tax filers.

[taxes4739]

>>I believe that is why it does not show in Turbotax, as the basic worksheet would not be applicable to all tax filers.

That rationale doesn't make any sense to me. "It would not be applicable to all tax filers" could be said of virtually every worksheet in a return. It's not like TT excludes worksheets related to retirement accounts, for example, even though those would not be applicable to all tax filers either.  So why on earth would they just skip this one, requiring us to dig through IRS instructions & re-fill them from scratch to understand how they get their numbers?  Isn't that the whole point of tax software - that it fills out the worksheets for you, and shows what it's doing...? There's not one other place in the return where it does this...

[LadyKel]

I also have complaints about this section.  It doesn't seem like TurboTax has this correct.  First of all, self-employed health insurance deduction is an above the line deduction, an adjustment to income.  See 1040 instructions for Schedule 1, Line 16.  I meet the criteria and the premiums were reported as wages on my W2 in box 1.  However when I go to enter the self-employed health insurance premiums below income, in the Other Business Situations section, it says that this is deducted on the W2 or K-1 (or something like that) and there isn't a place to enter the amount.  This needs to be fixed.

[mikej724]

Has anyone conclusively figured this out?

TT just pulled a random number into line 16 on schedule 1.

We paid around $10,400 in premiums and received around $8,000 in ACA tax credits. 

So line 16 should list $10,400 in self employed premium expenses but instead it lists almost $19,000. Not even sure how TT got that number since it's not the sum of $10,400 and $8,000.