Any Self Employed people near the ACA cliff experiencing this situation?

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celentano
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Joined: Wed Jun 13, 2018 2:55 pm

Any Self Employed people near the ACA cliff experiencing this situation?

Post by celentano » Wed Oct 10, 2018 7:52 pm

I am getting some incredible results from my tax software. I wanted to make sure they are correct. I really like what I am seeing:

I have ACA bronze plan (cheapest) with $18030 premium. When I enrolled I was able get $18000 Premium Tax credit (based on my guess for expected income). On Form 1040, I see $18030 on line 29 (SE Health Insurance Deduction). My AGI (and MAGI) is about $300 below the ACA cliff. Here is the best part: I don't have any value shown on line 46 (Excess APTC repayment). I think this is because my MAGI is below the ACA cliff. However it is below the cliff because of the huge SE Health Insurance deduction on line 29. Is this how it is supposed to work? Can this be a great benefit of being self-employed? By the way I have several other deductions such as HSA, IRA, 401K, Tuition, etc.

marcopolo
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Re: Any Self Employed people near the ACA cliff experiencing this situation?

Post by marcopolo » Wed Oct 10, 2018 8:04 pm

celentano wrote:
Wed Oct 10, 2018 7:52 pm
I am getting some incredible results from my tax software. I wanted to make sure they are correct. I really like what I am seeing:

I have ACA bronze plan (cheapest) with $18030 premium. When I enrolled I was able get $18000 Premium Tax credit (based on my guess for expected income). On Form 1040, I see $18030 on line 29 (SE Health Insurance Deduction). My AGI (and MAGI) is about $300 below the ACA cliff. Here is the best part: I don't have any value shown on line 46 (Excess APTC repayment). I think this is because my MAGI is below the ACA cliff. However it is below the cliff because of the huge SE Health Insurance deduction on line 29. Is this how it is supposed to work? Can this be a great benefit of being self-employed? By the way I have several other deductions such as HSA, IRA, 401K, Tuition, etc.
Did you read the link i provided to answer this question in your other thread about postponing bonus?

It explains in some detail how the SE Healthcare deduction interacts with the PTC. It is a somewhat complex, and iterative calculation. As you deduct on line 29, you get a bigger PTC, but with the larger PTC, you now have less to deduct (you only get to deduct the net amount you paid), so you have to do a iterative calculation to compute the amount that is deductible on line 29, and the resulting PTC you are eligible for after your taxes have been computed.

Here it is again:

https://taxmap.irs.gov/taxmap/pubs/p974-010.htm
Once in a while you get shown the light, in the strangest of places if you look at it right.

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tfb
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Re: Any Self Employed people near the ACA cliff experiencing this situation?

Post by tfb » Wed Oct 10, 2018 8:06 pm

celentano wrote:
Wed Oct 10, 2018 7:52 pm
I am getting some incredible results from my tax software. I wanted to make sure they are correct. I really like what I am seeing:

I have ACA bronze plan (cheapest) with $18030 premium. When I enrolled I was able get $18000 Premium Tax credit (based on my guess for expected income). On Form 1040, I see $18030 on line 29 (SE Health Insurance Deduction). My AGI (and MAGI) is about $300 below the ACA cliff. Here is the best part: I don't have any value shown on line 46 (Excess APTC repayment). I think this is because my MAGI is below the ACA cliff. However it is below the cliff because of the huge SE Health Insurance deduction on line 29. Is this how it is supposed to work? Can this be a great benefit of being self-employed? By the way I have several other deductions such as HSA, IRA, 401K, Tuition, etc.
It doesn't appear your software did it correctly (bad user input or bad logic in software). Please use this calculator for how much you can deduct and how much tax credit you can take. If the amount of credit you can take is less the advance credit you received, you are required to pay back the difference (subject to a cap based on AGI as a % of FPL).

https://cims.nyu.edu/~ferguson/Calculat ... 20ACA.html
Harry Sit, taking a break from the forums.

celentano
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Re: Any Self Employed people near the ACA cliff experiencing this situation?

Post by celentano » Wed Oct 10, 2018 9:10 pm

marcopolo wrote:
Wed Oct 10, 2018 8:04 pm


Did you read the link i provided to answer this question in your other thread about postponing bonus?

It explains in some detail how the SE Healthcare deduction interacts with the PTC. It is a somewhat complex, and iterative calculation. As you deduct on line 29, you get a bigger PTC, but with the larger PTC, you now have less to deduct (you only get to deduct the net amount you paid), so you have to do a iterative calculation to compute the amount that is deductible on line 29, and the resulting PTC you are eligible for after your taxes have been computed.

Here it is again:

https://taxmap.irs.gov/taxmap/pubs/p974-010.htm
I was going to read it, but once I saw this great result I postponed reading it. I even shared the results with the software support folks. They said the results were accurate. I guess I should td the iteration, but I am not very good at following highly complex IRS instructions, especially when they are more than several pages long. I may let IRS figure out and let me know if the software is doing it wrong. This is the most popular software.

celentano
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Re: Any Self Employed people near the ACA cliff experiencing this situation?

Post by celentano » Wed Oct 10, 2018 9:25 pm

tfb wrote:
Wed Oct 10, 2018 8:06 pm

It doesn't appear your software did it correctly (bad user input or bad logic in software). Please use this calculator for how much you can deduct and how much tax credit you can take. If the amount of credit you can take is less the advance credit you received, you are required to pay back the difference (subject to a cap based on AGI as a % of FPL).

https://cims.nyu.edu/~ferguson/Calculat ... 20ACA.html
I used the link you sent. It says:

Appropriate subsidy amount: 18023
With this subsidy, your net health insurance cost, to be deducted from Line 29 of your Form 1040, is: 18024 - 18023 = 1
With this net health insurance cost, your modified adjusted gross income is: 98314 - 1 = 98313
Your expected contribution is: 2006

I like this result also (not as good as the result from the tax software, but I think it is saying that I will only pay $2006 for insurance instead of $18024.

Spirit Rider
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Re: Any Self Employed people near the ACA cliff experiencing this situation?

Post by Spirit Rider » Wed Oct 10, 2018 9:38 pm

This isn't even a close call. @tfb is 100% correct. The tax software CSR as is often the case, clueless.

The Self-employed health insurance deduction is based on your net premium (premium - premium tax credit).

If your AGI is exactly what you estimated, your deduction would be 18,030 - $18,000 = $30. Otherwise it is an iterative process.

CFM300
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Re: Any Self Employed people near the ACA cliff experiencing this situation?

Post by CFM300 » Wed Oct 10, 2018 9:40 pm

celentano wrote:
Wed Oct 10, 2018 7:52 pm
I have ACA bronze plan (cheapest) with $18030 premium. When I enrolled I was able get $18000 Premium Tax credit (based on my guess for expected income). On Form 1040, I see $18030 on line 29 (SE Health Insurance Deduction).
Did you pay $18,030 in premiums, or did you only pay $30 because of the $18,000 tax credit? If the latter, then you entered the wrong amount into your software, which is why the wrong amount is showing up on line 29.

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tfb
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Re: Any Self Employed people near the ACA cliff experiencing this situation?

Post by tfb » Wed Oct 10, 2018 9:56 pm

celentano wrote:
Wed Oct 10, 2018 9:25 pm
tfb wrote:
Wed Oct 10, 2018 8:06 pm

It doesn't appear your software did it correctly (bad user input or bad logic in software). Please use this calculator for how much you can deduct and how much tax credit you can take. If the amount of credit you can take is less the advance credit you received, you are required to pay back the difference (subject to a cap based on AGI as a % of FPL).

https://cims.nyu.edu/~ferguson/Calculat ... 20ACA.html
I used the link you sent. It says:

Appropriate subsidy amount: 18023
With this subsidy, your net health insurance cost, to be deducted from Line 29 of your Form 1040, is: 18024 - 18023 = 1
With this net health insurance cost, your modified adjusted gross income is: 98314 - 1 = 98313
Your expected contribution is: 2006

I like this result also (not as good as the result from the tax software, but I think it is saying that I will only pay $2006 for insurance instead of $18024.
In the OP you said after deducting $18k your AGI is $300 below the cliff. Now if you deduct only $1 it would be $18k over the cliff? Please make sure the number you enter into the input field for "Federal poverty line for your state, household size, and year preceding coverage" in the linked calculator is the 100% FPL number, not the 400% FPL number. That should be about $12k for a household of 1, about $24k for a household of 4, for those living in the lower 48 states.
Harry Sit, taking a break from the forums.

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