Calculations in worksheets for Publication 974, Premium Tax Credit

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How does the tax application calculate the worksheets in Publication 974, Premium Tax Credit?


The tax application includes four worksheets based on Publication 974, Premium Tax Credit, for taxpayers who take a self-employed health insurance deduction for health care premiums that qualify for the Premium Tax Credit (PTC). These worksheets address a circular calculation issue due to the fact that the self-employed health insurance deduction impacts adjusted gross income, adjusted gross income impacts the PTC, and the PTC impacts the self-employed health insurance deduction.

The self-employed health insurance deduction also affects the calculation of the allowable deduction for Form 8582 passive activity losses, IRA contributions, Form 8815 exclusion of interest from series EE and I U.S. savings bonds, student loan interest, Form 8917 tuition and fees, and Form 8903 domestic production activities.

Worksheets in the application follow the Simplified Calculation Method outlined in Publication 974. Taxpayers who have a self-employed health insurance deduction, a Premium Tax Credit, and any of the listed deductions or exclusions may have a modified adjusted gross income on the relevant deduction or exclusion form that does not match what would be calculated from Form 1040.

These calculations use an interim self-employed health insurance deduction from the PTC worksheets instead of the final self-employed health insurance deduction. You can find this deduction on PTC Worksheet X, line 15, or PTC Simplified Calculation Method Worksheet, line 18, in the Form 8962 folder in Forms view.

If the Simplified Calculation Method is not the desired method to calculate the self-employed health insurance deduction in this situation:

  1. Remove the X in the Apply to SE Health Ins fields on Screen 1095A.
  2. Enter the desired self-employed health insurance deduction directly in the Health insurance premiums field on the appropriate activity input screen.
  3. Verify that the self-employed health insurance deduction plus the Premium Tax Credit on Form 8962, line 24, does not add up to more than the total premiums paid.

Related topic: Affordable Care Act FAQs

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