Why is SE health insurance deduction for a Schedule C sole proprietor being reduced from full premiums paid to a lesser amount, via Form 1095-A entry?

[JCTaxAdv]

$4,800 in health insurance premiums paid - and $0 APTC. Linking 1095-A to Sch. C stunts the deduction down to $1,500. I want to see the iterative formula, but ProSeries does not show it. Can I not link the Form 1095-A to the Schedule C, and instead make a direct entry into Line A1 of the SE Health & LT Care Dedn Wks?  There is high enough profit to accommodate both tax payer's SEP IRA contribution and the the full SE health insurance deduction... I think that the ProSeries iterative formula is somehow looking for an APTC that is not present. Have performed manual calculations in worksheets from Pub 974 & Pub 560... should be allowed full SE Health Insurance deduction from what I calculate.

[rbynaker · Accepted solution]

The full SEHI gets reduced by the amount of PTC.  Using your round numbers, I would expect to see an 8962 with $3,300 of PTC which then flows to Schedule 5 line 70 and 1040 line 17.

If that's not there, then I agree, you have a problem, don't put the shovel down just yet.

Rick

[rbynaker]

PS: Sometimes ProSeries chokes on the calculation and coughs up random amounts onto Schedule A as medical expenses.  If something shows up there, then you should call for a vote of no confidence in ProSeries.

[JCTaxAdv]

Yes - what seems to me to be an erroneous flow of $3,246 lands on Sch. A Medical expenses. No APTC, and MAGI (/Household Income) is at 403% of poverty line, so no PTC. Thanks for helping point my eyes on where to look. Think I will take matters toward manual entry to the SE Health Ins Ded Wks, and ask my client if she trusts me!

[rbynaker]

Yeah, that was my next step.  When you're just over the poverty line, you get into a circular math problem that has no solution.  The best thing to do IMO is to have the client contribute to an IRA (and/or SEP-IRA) until the MAGI is below 400% FPL.  It will literally make them money.  "Here Mr. Taxpayer, move this $500 from your right pocket to your left pocket and now the IRS will give you $3,000.  But if you take the $500 out of your left pocket you have to pay tax on it."

And for folks with good planning skillz, if it's December 15th and you're at 399% of FPL, stop working, it's time for a vacation.

[rbynaker]

PS: Even though it's April 1st, I *wish* I were only kidding about this.  I hate these tax cliffs where making an extra $1 costs you hundreds or thousands of dollars in taxes.  Beg, steal or borrow to get the IRA funded and AGI down to 400%.