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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 11357
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Lane, I'm working on a personal return with a Schedule C.

Customer Question

Hi Lane,I'm working on a personal return with a Schedule C. This person has form 1095-A and I'm trying to figure out how much they are allowed to deduct for Self Employed Health Insurance. Is it just the amount they paid directly plus any Repayment Excess, or can they deduct the Annual Contribution amount on form 8962 Line 11c?Please advise.Thanks,Kathleen
Submitted: 7 days ago.
Category: Finance
Customer: replied 7 days ago.
Disregard Lane. I see you are offline. Thanks anyways.
Expert:  Lane replied 7 days ago.

Sorry Kathleen ... They're working with a new system that, apparently, (even though I've not signed off) signs us off without out knowing.

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The issue here is that there IS a problem that IRS is aware of

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In July 2014, the IRS released 26 CFR 601.105 , in which they acknowledged the circular relationship between the SE Health Insurance Deduction, AGI, and premium tax credits:

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“… the amount of the [self-employed health insurance premium] deduction is based on the amount of the … premium tax credit, and the amount of the credit is based on the amount of the deduction – a circular relationship. Consequently, a taxpayer eligible for both a … deduction for premiums paid for qualified health plans and a … premium tax credit may have difficulty determining the amounts of those items.”

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The easiest way to understand how the two calculations work is to start on page 9 of the regulation and work through the examples the IRS has provided. When they mention the “limitation on additional tax,” they’re just referencing the caps on how much you have to pay back when you file your taxes if it turns out that your advance subsidy (the amount sent to your health insurance company each month) was overpaid because your income ended up being higher than projected.

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Here's the Rev Proc: https://www.irs.gov/pub/irs-drop/rp-14-41.pdf