TT is lowering my refund when I enter the 1095-A

[Cindy62707]

When the 1095-A from Market Place insurance was entered, TT is claiming that the credit the market place gave is too high and is wanting my son to pay over $500 more for his insurance.  It said he made more money than he had estimated.  He made exactly the amount he reported to Market Place who gave him the credit.  Market Place did give extra credit based on the amount he contributed every month to a Roth IRA. Why is TT thinking he got too much credit?  How can we double check TT's calculations?  Maybe TT is not aware of the additional credit MP offered him for putting $300 a month into a Roth IRA?

[SusanY1]

Unfortunately, it sounds like TurboTax is likely correct.  A contribution to a deductible Traditional IRA would lower taxable income, and would potentially allow for a higher credit but a contribution to a Roth IRA doesn't have the same effect. 

Perhaps there was a misunderstanding with regards to the advance credit at the Marketplace, but there is no consideration for that when determining the final premium tax credit.  

[Cindy62707]

Market place specifically encouraged him to donate to a Roth IRA.  Last year worked just fine.  it is Market Place that come up with the credit amount.  How can we see how TT is figuring what they think is correct versus what MP told us it would be?

[Vanessa A]

Roth IRA's are paid with after tax dollars.  This means that the ROTH IRA IS included in your AGI.  Since the Marketplace uses your MAGI which starts with your AGI and adds in other non-taxable income, and the IRS uses your MAGI to determine your Premium tax credit, contributing to a ROTH IRA will NOT put you in a better position for the premium tax credit.  This is because the ROTH contribution has absolutely NO affect on your AGI. 

See below from the IRS on ROTH contributions NOT being deductible from  your return as they are not reported on your return and also how the marketplace calculates your credit. 

When you say last year it worked just fine, it may simply be that last year your income was slightly lower, and just enough to allow for the credit. 

A Roth IRA differs from a traditional IRA in several ways. Contributions to a Roth IRA aren't deduct...

MAGI doesn't appear as a line on your tax return. To figure out your MAGI:

1. Start with your adjusted gross income (AGI). This is the figure on IRS Form 1040, line 11 of your fe...
2. Take your adjusted gross income amount and add any untaxed foreign income, non-taxable Social Securi...

How to estimate your expected income

[Cindy62707]

I'm not sure you completely understood the problem we are having.  We are not looking at his Roth contribution to take off his Federal income tax owed.  This is strictly the Market Place Credit that the Market Place told him he would get toward the cost of the high cost of Market Place insurance.  Market place was told what his income would be for 2024 (which is the same as what we are in putting into TT.  There is no estimating/actual figures differences).  So since MP was offering to increase his credit toward their expensive insurance by contributing to a Roth (and yet it said Roth), I'm thinking TT is not taking that into account.  There was a calculator on the MP website where you could see what your credit would be based on how much you would put in each month.  We tried a couple differing amounts and weighed the choices based on how much credit it offered based on the differing amounts and how much he thought he could live without by putting money into the Roth.  So since the info was completely accurate that was entered into MP (and is no different that the amount he made being entered into TT), why is TT taking priority over MP credits given?  Where can we see TT's calculations on this?  TT does make errors as it did not offer or suggest a specific form for us last year  when we did a Traditional to Roth conversion in December 2023 to show that our high income did not come from the entire year.  And even though we paid the tax on the conversion in the same quarter it was done, TT cost us a $160 penalty for not paying estimated taxes ALL YEAR in anticipation of doing a conversion at the very END of the year.  So I really want to see how TT is saying they are correct this time and MP was wrong.

[SusanY1]

Since a Roth contribution doesn't lower taxable income, I am not sure why the Marketplace would adjust the advanced credit for it.  This is why I assumed they misunderstood it to be a traditional deductible contribution. 

The premium tax credit is determined based solely off of the Modified Adjusted Gross Income (MAGI) on the return, and the information on the 1095-A.  Roth IRA contributions don't affect the MAGI, so they aren't in the calculation at all.  

I can't be sure what happened at the Marketplace but making a Roth IRA contribution doesn't increase the premium tax credits.   You can see the credit calculation on Form 8962.