ACA Premiums and SE...
Clear all

ACA Premiums and SE health insurance above-the-line deduction


Tod Cox
Active Member Customer
Joined: 1 month ago
Posts: 7
Topic starter  

For modeling healthcare expenses in Period 3, I am trying to understand how PRC Gold handles the premium expenses when there is Self-Employment income in Period 3. Someone with 1099-NEC (or other Schedule C) income can deduct health insurance premiums including the unsubsidized portion of ACA premiums from the Schedule C income on Schedule 1, Part II, Line 16. This has the unfortunate side effect of creating a circular calculation==> AGI determines ACA subsidy; the non-subsidized ACA premium can be deducted from income; lower income increases the subsidy which lowers the non-subsidized ACA premium and so on and so forth. More info at the Finance Buff's website.

I see the box for pre-tax percentage in the Expenses --> Healthcare. However, the whole ACA premium cost is not deductible and the percentage that is pre-tax is dependent on other values affecting AGI. In my case, back-of-the-envelope calculations show significant variation year-over-year due to various factors. Also, looking through the Tabular Projections after changing this % does not seem to have the outcome I would expect on AGI & Taxes for this situation.

Additionally, the SE health-insurance premium deduction does affect the QBI deduction by reducing the Allowable Schedule C profit in the QBI calculations. I am not seeing this adjustment which would indicate I have not entered something properly.

I dug through the manual several times, but I seem to be missing something to get PRC Gold to handle this situation?

Stuart Matthews
Member Admin
Joined: 10 months ago
Posts: 183


PRC simply doesn't handle all of the complexities you've identified in your post: 1) the pre-tax percentage of healthcare expense is fixed and there is no implementation of a relationship with AGI and 2) there is no implemented connection between the SE health insurance premium deduction and the QBI deduction. I've made a note to consider enhancements in this area for the 2022 model but it's too early for me to state how that will come out in the end.