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Self employed health insurance deduction on Schedule C for Marketplace Insurance

Forum|Forum|5 years ago
April 7, 2021
1 reply
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I have a new client who has had marketplace insurance in the past and now this year. This is my first client who has had this type of insurance.

Last year the prior CPA did not deduct any amount for self employed health insurance related to the premiums paid for marketplace insurance. The Schedule C business had a profit that exceeded the premiums paid.

This year, the software is calculating a 3k credit for self employed health insurance. It seems this is correct but why wouldn't it have been taken into account by the prior CPA?

Am I correct to take the self employed health insurance deduction if it is related to this marketplace insurance?

Other details:

Client is married this year so only had the marketplace insurance until august. The American recovery plan has prevented the client from having to make a big repayment of the premiums. Not sure if any of that is relevant.

ProConnect Tax

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Best answer by qbteachmt

The ARPA provision is for waiving repayment of the Advanced Premium that would have been paid on behalf of your client. Not "the premium" but any supplemental amount paid on their behalf. That's part of the "affordability" part of the ACA = Affordable Care Act.

The 1095-A would be linked to the Sched C, along with any other premiums the taxpayer incurs for their new policy, to show it is allowed as deduction against the gross income of that business.

Then, if they fall below the 401% limit, they get to deduct the additional amount on the 1040 = Form 8962.

"It seems this is correct but why wouldn't it have been taken into account by the prior CPA?"

Not everyone knows what they are supposed to be doing. You might recommend amending the prior year(s).

qbteachmtAnswer

Level 15

The ARPA provision is for waiving repayment of the Advanced Premium that would have been paid on behalf of your client. Not "the premium" but any supplemental amount paid on their behalf. That's part of the "affordability" part of the ACA = Affordable Care Act.

The 1095-A would be linked to the Sched C, along with any other premiums the taxpayer incurs for their new policy, to show it is allowed as deduction against the gross income of that business.

Then, if they fall below the 401% limit, they get to deduct the additional amount on the 1040 = Form 8962.

"It seems this is correct but why wouldn't it have been taken into account by the prior CPA?"

Not everyone knows what they are supposed to be doing. You might recommend amending the prior year(s).

Don't yell at us; we're volunteers

E

EmsBTW2016Author

Level 4

Thank you for clarifying!

So let me make sure I understand:

Regarding Self Employed Health insurance Deduction:

The 1095-A is linked to Sch C, showing the premiums paid for health insurance (these are the amounts from Part II Column A) which can be deducted against income as a Self Employed Health Insurance Deduction regardless of if they are below the 401% limit. If I understand correctly then I agree this should have been done in the prior year like you said.

Regarding the Premium Tax Credit:

If they are below the 401%, then they get a credit equal to the amount of the total premium tax credit less the advance payments of the premium tax credit - this amount goes on 1040 as a credit.

In my clients case, since client got married this year the increase in income means they are NOT under the 401%. Since they are not under the 401%, they would have normally had to pay back the advanced premium that exceeded the premium tax credit. Because of the ARPA provision, they do not have to repay this amount.

Am I on the right track? Thanks so much for your help.

qbteachmt

Level 15

If Column B of the 1095-A doesn't have values, you can get that info from the marketplace. I would expect your client has Columns B and C filled in, though.

Depending on how close to the 401% they are, you can see if making a deductible IRA would make a difference, if that is allowed for them. If they have an HSA plan, that contribution's deduction also helps.

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