Self-Employed Health Insurance Deduction and Premium Tax Credit

[LSTAX]

Taxpayer is single shareholder of S Corp that pays for health insurance from ACA marketplace.  The health care premiums paid amount of $3,600 is on his W2 and on the 1120S K-1 line 17 other information.  His 1095-A shows Monthly Enrollment Premiums of $6,869 and Monthly Advance Payment of Premium Tax Credit of $2,862 and the full amount is greater than his actual premium tax credit of zero, so of course his federal refund is reduced. 

Should the SE Health insurance credit be the $3,600 amount from the W2 or should it be the $7,607 amount calculated that I get when I assign the 1095-A to the 1120S form and activity via screen 39.2?  The math appears to be Monthly  Enrollment Premiums $6,868 -  2,862 (APTC)  = 4,007 + W2 amount  3,600.  I know you can't double dip but should he get credit on the S/E Health Insurance deduction Schedule 1 line 17 for the 2,862 that he did not have to pay but now has to be paid back? 

Thank you

[amec]

Does the taxpayer have wages or SE income from other sources?

Who was the $3,600 health care insurance premiums paid to?

[LSTAX]

There are no other wages or SE income.  He pays himself a W2 salary and includes the health insurance premiums on his W2.  The $3,600 premiums are paid to Kaiser which I believe is the covered CA plan.

[Couls Law · Accepted solution]

Amount in W2 which he's already paid + the PTC payback.  Increasing the SEHI deduction will reduce the payback amount so you have to a little trial and error until you get things right.  I would not use screen 39 to trigger SEHI deduction,  I would use screen 24.    

[LSTAX]

Thank you! Sounds like the correct way to do this.

[amec]

If the company did not reimburse the taxpayer for the additional SE health insurance, and subsequently add it to the taxpayer's W-2 it does not qualify as SE health insurance.

You may want to look into the proper treatment of this further.

[LSTAX]

I believe he paid the marketplace insurance through the S Corp and the S Corp deducted the amount and put it on his W2 as taxable income and when he reconciled via the 1095-A on his personal return, he himself has to pay the credit back to the IRS.  He should definitely be able to claim the above the line SE Health insurance amount the company paid, but are you saying the APTC he now pays back cannot be considered  SE Health insurance unless the company pays it/reimburses him?  That would be in tax year 2023?  Thank you!

[amec]

Yes

[LSTAX]

I think you're right.  In order to be a SE Health insurance deduction, it has to be paid by the company and is supposed to be on the W2. The APTC he has to pay back isn't on the W2 for 2022 so I will not include it.  I don't know if it would even be acceptable for the S Corp to reimburse the amount and then deduct it and put it on the W2 for 2023.  They didn't plan correctly, paid premiums based on too little income, so maybe they lost the opportunity.

[Couls Law]

Why not just file a W-2C for 2022 and reduce distributions or record loan from SH on the S corp if you're worried about it.  Cash is fungible.