2020 Tax collision between self-employed health insurance deduction & excess APTC non-payment

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couponhead
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Joined: Sun Sep 21, 2014 7:35 am

2020 Tax collision between self-employed health insurance deduction & excess APTC non-payment

Post by couponhead »

The latest covid support / tax bill removed the need for people whose incomes changed during the year to repay their excess advanced premium tax credit (APTC) for the 2020 tax year. People who were given too much tax credit during the year got to keep it.

Normally, the self-employed health insurance deduction (SEHD) occurs via an iterative formula in which the AGI is calculated and used to determine the PTC. The PTC is then used to adjust the amount of the health insurance deduction, which affects the AGI, etc.

The software formerly known as TaxCut performs this calculation more-or-less automatically. However, in cases where an APTC would normally be repaid, it uses the pre-imaginary-repayment health insurance cost to determine the self-employed health insurance deduction. That is, it seems to allow a person whose APTC repayment was waived to both benefit from the waiver and the full SEHD.

This seems surprising to me. On the other hand, lots of things that the government does are surprising to me. For instance, people who received PPP money got to both benefit from it and deduct the losses that they would have had if they had not gotten the PPP money.

Does anyone know if TaxCut is producing a correct interpretation of a strange tax code? Does TurboTax produce the same behavior? I am inclined to trust the professionals who make this software unless I have clear reason to do otherwise.
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