We have a marketplace plan that we paid full cost for in 2020 (did not take a monthly subsidy) and have taken this approach for the last couple years. Each year when we file taxes, we then get a large PTC back as calc'd on the 8962. The policy is under my husband's name and is associated with his Schedule C business. We have done our taxes with more sophisticated software than TT up until last year, then did taxes with TT for 2019. For all these years, the software correctly calc'd the PTC, allowing that max amount rather than shooting the amount over as a SE Health Insurance deduction. This is obviously favorable (and allowed per Pub 974 p. 56).
For 2020 tax prep, I have input everything exactly the same as in 2019 TT, but for some reason the software is forcing ALL the premiums paid as a SE Health Insurance deduction and is showing zero PTC on the 8962. If I uncheck the box "I'm self-employed and bought a marketplace plan" in the 1095-A input area and officially unlink the policy to my husband's Schedule C, the calcs are then done correctly and we get the full PTC we are eligible for. But this is wrong! The policy IS associated with him and his Schedule C business. Again, when it was linked correctly in 2019 TT the outcome was correct and as expected. The same inputs in 2020 TT are causing a different and incorrect result.
Has anyone else had this issue or can shed any light on this? His Schedule C net income is high enough that it exceeds the amount of the premiums, so that's not the issue. Thanks!
Self-employed health insurance has to be paid by you, not by the Marketplace. You can't have a deduction for the expense the Marketplace is paying for and then claim the credit as well.
The blue "Learn More" next to the SE question in the 1095-A screen states:
If you reported self-employment income on any of the schedules listed below and you used that income to buy health insurance through Healthcare.gov or your state Marketplace, you can deduct your premiums on your taxes. However, you need to tie that income to your 1095-A so we can properly calculate the deduction amount.
Hi, thanks for your response, but it's missing the point of the question I listed. Our premiums weren't paid by the marketplace. They were paid by us. We took zero subsidy each month so we paid the entire premiums each month on our own.
I am not trying to claim the deduction AND the credit. I just want to maximize the credit which is allowable (see pub 974 p. 56 for info on self-employed people using marketplace insurance). The problem is TT is zeroing out the credit and putting the entire amount down as a deduction. This is obviously not the favorable approach.
Yes, but they will be reimbursed by the Marketplace in the form of a PTC. If you paid $2000 out of pocket and are reimbursed $2000, then you in effect, have paid nothing. There is no expense.