Post Questions Here

If you have a practical question about Obamacare / PPACA / Health Care Exchanges, please post it here.

I don’t know if I will be able to answer your question, but I’ll try — and if I can’t maybe someone else can.

Please: No political discussion!   This forum is to intended to  help people work with the system now in place.

92 thoughts on “Post Questions Here”

1. Anonymous

We are a family of three. My husband and son will probably get the Bronze HSA as they rarely need medical care. If we get the Bronze HSA from Kaiser, it says the out-of-pocket max for an individual is \$6,350 and for a family it is \$12,700. Does it make sense to cover my husband on the Kaiser Bronze HSA and my son under a different HSA Bronze plan (ie Blue Shields) so if something catastrophic happens to my husband, we would reach the out-of-pocket max at \$6,350 (instead of at \$12,700)?

• freelancer

I think you might be confused about how the out-of-pocket maximum works. Within each household insured by the same policy, the \$6,350 is the maximum out-of-pocket that will be spent on behalf of any one person. So in your case, it would not make any difference. Whether they are on the same policy or different policies, as soon as \$6,350 has been reached for one person, then the insurance company would take over and be making all payments incurred on that person.

Because \$12,700 is exactly double \$6,350, it really doesn’t make any difference whether two individuals have their own policy or different policies. The potential benefit of the \$12,700 limit kicks in with a group three or more — in that case the math may allow the out-of-pocket maximum to be reached by combining expenses for all three, even though no individual has reached their individual maximum limit — as any combination of expenditures reaching the limit would count.

Are you certain that your family is not eligible for a tax subsidy? It is acceptable to split a family onto different policies, but the advance tax credit can be used toward only one policy, so in many cases the cost reduction that comes with the subsidy would outweigh any savings a family might get by splitting the family onto different plans. Of course there are also financial and tax benefits available if you are able to fully fund the HSA; it might be worth exploring various options with a tax expert.

2. Anonymous

• freelancer

You might want to double check with Kaiser then — it’s possible that there is room for interpretation on how that provision is implemented.

3. Anonymous

Read your post on MAGI and have done a fair amount of research, but I’m still uncertain about whether my daughter’s (a minor) monthly Social Security Survivor’s Benefit (nontaxable) should be included in household income in applying for subsidized coverage under the ACA. A person with the federal exchange, after much hemming and hawing, told me no, but left me less than convinced. What do you think?

• freelancer

Assuming that your daughter has no other income, I would say no, that doesn’t have to be reported.

Here is why:

The law defining household income is set out in 26 USC 36B(d).

It first defines household income, as follows:

(A) Household income

The term “household income” means, with respect to any taxpayer, an amount equal to the sum of—

(i) the modified adjusted gross income of the taxpayer, plus

(ii) the aggregate modified adjusted gross incomes of all other individuals who—

(I) were taken into account in determining the taxpayer’s family size under paragraph (1),

and

(II)

were required to file a return of tax imposed by section 1 for the taxable year

.

If your daughter has no other income, then she would ordinarily not be required to file a tax return — and thus her income would not need to be included as “household” income.

If your daughter had other income requiring her to file taxes, then the answer would be different. She would then meet both tests under paragraph (ii) and her modified gross income would be included, using this definition:

The term “modified adjusted gross income” means adjusted gross income increased by—

(i) any amount excluded from gross income under section 911,

(ii) any amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax, and

(iii) an amount equal to the portion of the taxpayer’s social security benefits (as defined in section 86 (d)) which is not included in gross income under section 86 for the taxable year.

So basically you need to start with determining whether your daughter is required by law to file an income tax return. If the answer is no, then her income will not be included.

Please keep in mind that this blog is not meant to be a substitute for professional or legal advice. I’m just offering you one opinion, backed up by a citation to the law that I am basing it on. I think the best approach for families who are uncertain about their eligibility for subsidies is to consider deferring part or all of any advanced tax credit subsidy you may be entitled to, so that you aren’t faced with having to repay a large lump sum with your 2014 tax return.

4. Anonymous

Thanks for the detailed response. In her case, there is no additional income and she has not and will not be filing a tax return. Legally, she is not a “taxpayer,” and her benefits do not qualify as household income. So, it would appear, at least, she does not meet the initial standard required for Public Law 112-56 (adding non-taxable SS benefits to MAGI calculations) to apply.

5. Steve T

I read your posting about determining MAGI. You mention you can deduct IRA and HSA contributions for determining MAGI. So here is my question.
I currently have an Individual HSA plan through Blue Shield of California.
Covered California offers a Bronze HSA eligible Blue Shield PPO. Since my MAGI for 2014 will be below 400% of the Federal Poverty Level I’m eligible for a Premium Tax Credit. If I opt for the Covered California Bronze Blue Shield HSA PPO, would I be able to receive the premium tax credit AND Deduct my 2014 HSA contribution on my 2014 Federal Tax Return?

• freelancer

As the law is currently written, it appears that way. Keep in mind that you are not allowed to use HSA funds to pay for insurance premiums, so the tax credit for the premium payments actually serves a different purpose than the tax credit for funding your HSA account. The HSA tax credit is there to encourage people to put aside money to pay for medical expenses when they have high deductible plans. The ACA doesn’t change that; even though the account is related to the type of insurance you have, it is still a separate fund, and represents a different expense to you.

6. Steve T

Thanks for your reply. Let’s make the question a little tougher. I am currently collecting unemployment insurance, You are allowed to use HSA funds to pay for Insurance premiums if you are on COBRA or Unemployment Insurance. Assuming I am still collecting unemployed when Covered California takes effect, could I use my HSA funds to pay for insurance premiums, receive the Tax Subsidy AND deduct my \$4300 2014 HSA contribution?

• freelancer

Steve, as far as I know, there currently is no law or regulation that says you can’t have both the tax deduction and the refund, even if you do need to use HSA money to help pay premiums.

Would it change your plans to have an answer now? That is, would you opt for a different insurance plan or hold off on funding your HSA?

I ask because things are going to get a lot clearer once IRS forms for 2014 tax returns are available, but I honestly don’t know when that will be. Maybe late in the year at best.

As I wrote in my article, “The Evolution of MAGI” – things can change. Some sort of clarifying regulation could be issued, or a minor tweak or amendment to the law could be changed, with the idea of closing loopholes or clarifying areas of inconsistency.

.

7. Steve T

Thanks for your answer. I recognize things can change. I am probably leaning to go with the Covered California Blue Shiled Bronze HSA PPO. (\$636 a month vs \$287 is a big difference. Only problem is the doctor network). In the 15% tax bracket the difference in premium amounts to the HSA deduction in only two months. Good deal, providing I don’t get sick:-).

• freelancer

I’m getting the same plan, Steve — I wish there was a Silver HSA on the exchange, but of course the premiums are less with the Bronze. (There is a Silver HSA for the small employer exchange — but not the individual exchange).

The networks for each company are the same at any metal level. I have also confirmed that with Blue Shield, you can still get the “Blue Card” which can be used when traveling out of state. I don’t tend to have much in the way of medical expenses — one reason I like having an HSA is that I can use it for many expenses that are not covered in the regular policy, such as dental and vision care. The new policies will not cover chiropractic either.

Another advantage of the HSA is that you can use it to go out of network for a consultation or a routine procedure. I wouldn’t want to go for something that cost thousands of dollars, but at the same time I do feel that I have a little bit more freedom. So with or without the tax deduction, it’s nice to have that account. (Of course we can spend our own money on these items anyway, but it can be hard to save money, and it certainly helps with budgeting.).

• Dan

Freelancer,

But the Silver plan has a huge deductible. While the Gold has zero deductible. It is true the premium is less. So I guess if you are healthy you go with Silver/Bronze otherwise Gold /Platinum seems to be a less costly choice.

• freelancer

If you do the math, you will see that you are paying most of the cost of the deductible in increased premiums for the plan with the lower deductible. For example, my full cost premium for a Blue Shield Bronze HSA plan (\$4500 deductible) would be about \$655/month; the Silver would be \$805/month – and Gold would be \$905 a month. (I’m older so my premiums are on the high end). So on an annual basis, that is \$7860 annually for Bronze; 9660 for Silver; \$10,860 for Gold. So in order to buy the plan with the \$2000 deductible, I pay \$1800 more than I would for the \$4500 deductible — unless my out of pocket medical expenses are \$1800, I can’t really come out ahead. The difference between having a \$2000 deductible and no deductible (Silver vs. Gold), I would have to pay \$1200 more in premiums.

Whatever plan I choose, the maximum annual out of pocket is the same — so at the high end of cost, you can calculate the difference in cost by simply adding total premium costs to maximum out of pocket.

The math would be different for lower income families who qualify for cost-sharing subsidies, or for individuals with known chronic conditions that might benefit from lower co-pays earlier in the year, particularly for high cost prescription drugs.

• Major aspect of paying premiums or contrbuting to HSA plan vs paying medical expenses or deductibles/co-pays is how they affect your tax return. Health insurance & HSA contributions are deductible on Form 1040 to reduce your MAGI as are retirement contributions and half of SE tax.

ACA raised the floor on medical expenses Schedule A Itemized Deductions to 10% of AGI so can be harder to deduct and if you can it will only affect taxable income. So if you pick a plan with high copays & deductible you will have more expenses that may not lower your taxes.

If you can reduce your AGI you have more potential benefits in lower taxes or higher subsidy. Selecting a plan with higher premiums lowers AGI (if self-employed) for subsidies determination as well as other measures including itemized deductions, saver’s tax credit, EITC and taxable income. Same is true for dental/vision insurance not included in ACA plans so consider paying for plan rather than all out-of-pocket.

Selecting any plan also depends on your expected usage of doctor vists, tests, prescriptions, etc. If you are healthy with few medical expenses you may not want to spend more on premiums. But if you expect to use medical care it may be better to pay upfront in premiums vs potential non-deductible medical expenses on Sch A. The plans aren’t fantastic with limited networks and paying for a PPO vs HMO plan increases your choices if that’s an issue for you. However, if older those premiums are very high so not very affordable unless your MAGI gives you a big subsidy.

Don’t forget any deduction reduces your taxable income by your marginal tax rate so at 20% every \$100 premium dollar really costs \$80. The Bronze plans with HSA may cost less but with high deductible you could burn through your HSA money fast. Gold plan has no deductible so you may pay less out-of-pocket and Platinum although it costs more has \$4000 maximum vs \$6350 for the rest.

No easy feat to make all these calculations and projections (how sick are/will you get) especially if you don’t have steady or predictable income as many self-employed experience. I developed a spreadsheet customized each year to my situation so it’s easier to see how all these aspects interact and affect each other which is very enlightening.

8. Steve T

Thanks for the info. Glad you are so knowledgable. Can you email me outside of this blog? (triceco@aol.com) or provide a way to contact you as I have other Blue Shield HSA Questions.

I am on the same page with you regarding Medical Expenses and the Blue Card is a real asset.

Even though the networks are the same within the metals, the Blue Shield Covered California PPO network is much smaller than the traditional Blue Shield PPO and the information on the Covered California web site is not always correct. This presents a potential problem. There are also differences with this Health Plan on the Bronze level than what was previously posted on the Covered California web site.

I find getting through to Blue Shield (not being an agent) and getting answers quite a challenge. Thanks.

• freelancer

Actually, I have found getting through to Blue Shield somewhat easier than Anthem… but I don’t always trust the information that the BS agents give me. I do know that the UC hospitals are not part of the new network, but I think that part of the reduced numbers of providers is just that many private doctors and small group practices that historically have accepted Blue Shield haven’t done the paperwork yet to get onto the new exchange. They may be taking a wait-and-see approach or may not be aware that many of their existing patients will be moving onto the exchanges.

I don’t think that Blue Shield is intentionally trying to create a smaller network — I think it’s trying to control costs and some doctors and facilities are opting out because they don’t want to accept lower reimbursement rates. But I don’t think that long-term that the exchange PPO’s will be smaller — rather, I think the exchange PPO’s is just the front wave of things to come. That is, I think the same cut-backs we are seeing with the PPO’s and the move toward EPO’s will also start to hit the employer market over time, as their various contracts come up for renewal and are renegotiated.

I can’t correspond with you privately because I am not an insurance agent and do not have inside knowledge. So I’m not really the right person to answer all your questions — I’m just someone who is going through this myself, learning a lot for the first time myself. I just like to be able to share what I learn as I go along – and enjoy hearing from others as well. I think that if you want specific advice you should contact a licensed insurance agent or broker. I have found this web site to be a good source of information: http://www.cahba.com/

9. Debbie

Hi. I hope it’s ok to ask a basic question. In terms of self-employment and MAGI, do regular business expenses that are usually used in the past such as cost of domains, web hosting, buying reports, paying for search engine optimization etc count in terms of deductions that are used to calculate if one is eligible for a subsidy? The bulk of my business expenses consist in these type of costs that are used to run my business? Thanks.

• freelancer

Debbie, those are basic expenses that should be deducted from your Schedule C. Eligibility for the premium support tax credit is determined by your modified adjusted gross income, which is your AGI with some types of tax exempt income added back in. Only the net income from self-employment would be included in that.

• ACA didn’t change any laws for determining self-employment income so the same rules apply regarding business expense deductions. Your health insurance premiums are not deductible on Schedule C but are deductible on Form 1040 to determine AGI. The calculation for MAGI doesn’t add back any business related deductions including SE tax, health insurance, HSA or retirement contributions.

10. Steve T

Question about Changing Plan during Open Enrollment:
I signed up for the Blue Shield Bronze HSA with Covered California effective January 1 and made my first payment. My physician is not on the network.
Can I switch to another plan before March 31, the open enrollment period ends? Example: I switch to Anthem at the end of March effective May 1, keep Blue Shield until April 30, 2014 and then go to Anthem?

• freelancer

Steve — I don’t believe that you can switch once you have made the premium payment, but I would suggest that you try to contact Covered California to find out.

• Dan

Steve,
What if you simply cancel first plan, do not pay second month then enroll again before March 31 in a new plan? Just a crazy thought!

11. Dan

Freelancer,

God forbid but if you get sick and you can not work for let say a few months your income can drop in the Medical range. Do you think COVERED can cancel your current insurance and push you into Medical? Do you thing they will give you the option to pay all the premium by yourself in case you want a good medical plan?
Would this will be a triggering event and at least you can go outside the exchange?

• freelancer

No, your insurance wouldn’t be cancelled in favor of MediCal unless that is what you wanted. The only way that your insurance can be cancelled is if you fail to pay your premium share as required. There could be an issue the next open enrollment period if your income was too low for the upcoming year, but you are entitled to keep the plan you enroll in for the year that you sign up.

A significant drop in income or change in eligibility for MediCal would be a significant life event that would give you the ability to sign onto a different policy or apply to MediCal — but again, Covered Cal. is not going to know about a short-term loss of income unless you tell them.

You can get into financial trouble by failing to report an INCREASE in income, because you could then owe money to pay back the advance premium support with the following year’s taxes — but that wouldn’t be a problem with a decrease in income.

12. Ramesh

I am a individual seeking health insurance for my family. How should I enter my net loss carry forward on the covered ca online application-Is it entered as part of income(deducting the loss carryover form the income) or entered under the deductions section ? Thanks

13. Steve T

For the record, I’ve had a high deductible Blue Shield HSA plan for a few years, and prior to that an individual policy. Most of the times that Blue Shield came out with a newer less expensive plan (but with a higher deductible I changed plans). I am now 63 collecting unemployment, not opted as yet for Social Security and doubtful that I will return to work.

HSA plans allow a Federal Tax Deduction, even without any earned income, and that same deduction can be used to lower your MAGI for the subsidy. If congress extends unemployment I can also use HSA funds to pay for premiums. On the flip side, I am often gouged price wise for doctor and medical procedures. Your not considered a private patient becuase you have insurance, but since its a high deductible you pay full price. If not in the network your really screwed, and the netowrk price isn’t much of a savings. Thus its a gamble, that you really don’t incure high medical expenses. With the Bronze HSA you still pay a 40% co-pay if you reach your deductible and the 9,350 single total out of pocket only applies if used within the network. Quite different from the Bronze Non-HSA plans also offered. With Covered California the Blue Shield network is much smaller. Anthem also offers a Bronze HSA.

Even though I am in tier One, my monthly premiums with a \$5200 deductible were \$578 and now raised to \$636. The Bronze Blue Shield HSA is \$550 (age 60 or over) and with a subsidy premiums go down to \$207 (good deal). Strategy is to live off savings in 2014, claim the standard decuction and only opt for Social Security and IRA withdrawal if needed keeping my MAGI as low as possible.

Hence the question about the potential of changing plans in March, if my medical situation changes. Not really what Obamacare had in mind, but works. Thoughts comments, anyone?

14. mundanethings

I am curious about teenage children and the subsidy calculation. If my son has a min wage job and makes a couple thousand dollars in the year, does that count in the subsidy calculation as household income? Also what about college aged children in under the age they can ‘stay on their parents’ insurance? Can those adult children still count in the family size question and be in the same plan with the parents? Not sure how that all works? Thank you!

• freelancer

If your teenage son earns enough to be required to file a tax return, then his income should be included for the household. Same with college age children — they are typically included in your household, and their income is listed if it is enough to trigger a tax filing requirement. IRS publication 929 at http://www.irs.gov/publications/p929/ar02.html has the information you need to determine whether your dependent children need to file returns.

There’s a fairly simple, logistical reason for this rule: at the end of the tax year, your subsidy will be reconciled by IRS based on reported income. IRS can reconcile information based on social security numbers and tax returns for everyone within the household– so there’s no point in a requirement to report income that is below the filing threshold.

Here’s how the law is worded:

Household income

(A) Household income

The term “household income” means, with respect to any taxpayer, an amount equal to the sum of—

(i) the modified adjusted gross income of the taxpayer, plus

(ii) the aggregate modified adjusted gross incomes of all other individuals who—

(I) were taken into account in determining the taxpayer’s family size under paragraph (1), and

(II) were required to file a return of tax imposed by section 1 for the taxable year.

See subsection (d) of 26 USC 36B at http://www.law.cornell.edu/uscode/text/26/36B

15. Mom on the Go

Please explain whether modified adjusted gross income includes parental SSA survivor benefits and child survivor benefits if the child does file a tax return. (I have heard various answers.) Thank you.

• freelancer

Mom on the Go, if you look at my answer to Steve T posted below — and the links from that post — you’ll see that the survivor benefits are included in MAGI for the affordable care act — so yes, it looks like you will count that money and you should plan accordingly.

I am not sure where you have heard “various answers” – but it’s always a good idea to look to see if a specific federal law or regulation is cited.

16. Steve T

Effect of Social Security on MAGI when I turn 65?
Freelancer, Monica and Dan you’ve been great answering my questions. For 2014 I am set. Selected Blue Shield Bronze HSA PPO, low MAGI haven’t opted for Social Security, primary care doctor is in Network, all is good.
I turn 65 in August 2015 and will receive Medicare then, so ACA will cover period from Jan-July. Anyone know if I opt for Social Security in August 2015 does the income derived affect the MAGI for 2015 or do I need to wait until January, 2016?

• freelancer

Steve, the law says that MAGI includes, “an amount equal to the portion of the taxpayer’s social security benefits (as defined in section 86 (d)) which is not included in gross income under section 86 for the taxable year.” 26 US Code 36B

The definition of social security benefits in section 86(d) is “any amount received by the taxpayer by reason of entitlement to … a monthly benefit under title II of the Social Security Act”. 26 US Code 86 Title II of the Social Security Act includes all types of Social Security payments (old age, disability, surviver’s benefits).

So the answer is yes – any money you receive from Social Security in 2015 will be part of your MAGI. Whether you opt to take your Social Security in right away or wait until January 2016 will probably depend somewhat on your other income, as well as the amount of your monthly benefit — if that amount is going to be enough to render you ineligible for a tax credit subsidy, then you probably want to wait. But if it merely impacts the amount of subsidy you get — and you need the money — you might decide that it’s better to take the money earlier. There is a big drop off when a person hits the 400% FPL (federal poverty level) limit, but for lower income the changes in subsidy level are more gradual.

17. Mom on the Go

Thanks for the input on my original question. It appears the mom portion of survivor benefits count…. Anyway, my earlier post contained a dreadful mistake. How are child survivor benefits treated if the child does NOT file a tax return. Thank you,

• freelancer

My opinion only: I would say that you do NOT count the SSA benefit of the child, if the child is not legally required to file a tax return. The law states:

The term “household income” means, with respect to any taxpayer, an amount equal to the sum of—
(i) the modified adjusted gross income of the taxpayer, plus
(ii) the aggregate modified adjusted gross incomes of all other individuals who—
(I) were taken into account in determining the taxpayer’s family size under paragraph (1), and
(II) were required to file a return of tax imposed by section 1 for the taxable year.

From 26 USC 36(b)

So I would say that if your child is not required to file a tax return, then none of the child’s income is counted. But if the child did file a return — let’s say a teenager with a job that pays enough to require filing — then the SSA benefits would get added back to determine MAGI, and would be counted.

18. Hello. Can you tell us, yes or no, if one can reduce MAGI thus lower ACA monthly premiums (or possibly qualify for Medicaid) by contributing to an IRA and/or 401K? Many people are seeking this yes or not answer but it seems to be elusive. Thank you.

• freelancer

Yes, you definitely can reduce MAGI for purposes of subsidy eligibility through IRA contributions. Any sort of deduction that reduces your AGI for purposes of tax calculation will also reduce MAGI for purposes of determining eligibility for tax credits for insurance policies purchased via the exchange. This is very clear in the wording of the law, and I have posted quite a few articles on this web site exploring and explaining this. Simply click on the word MAGI in the tag cloud and you will find most of them.

Medicaid is a little different. At least in my state (California), I believe medicaid eligibility will be evaluated based on monthly rather than annual income, and it may not be wise for a person over the age of 55 who has financial assets to opt for Medicaid, even if technically eligibility, because of estate recovery laws unrelated to the Affordable Care Act.

19. John

Self employed here… Currently on a subsidized plan throu covered California.. I receive both premium assistance and silver out of pocket cost reduction assistance.

I anticipate 2015 to be identical to this year so I am electing to stay on my current plan. However being self employed this may not pan out. As I understand it at the end of the year if I my income is more I will be required to pay back my premium subsidy ( potentially capped depending on hoe much more) but my cost reduction benefit ( copays ) will not have to be paid back.

My first question is , why wouldn’t everyone simply state a very low anticipated income, then pay the difference at the end of the year ( would of been paying the same sum anyway each month, just now as a lump sum) And reap the benefits of the copay reduction all year?

Second question.
If at the end of year we determine I owe say 2,000 back in premium assistance subsidy that I did not end up qualifying for, can I use that 2,000 as a write off? Since it is a health insurance premium? And just for fun/curiosity what if that new 2,000 write off pushes my magi back into the subsidy zone ?

Thank you, great site

• freelancer

First question: When you sign up on the exchange there is a process of income verification, so you can’t just make up figures. The first part of the process is that there is simply computerized check of your estimated income against your most recent tax return. If it is reasonably close, then the system approves you and you may not even be aware that your income records were checked. But if it can’t be cleared,then the practice seems to be to provisionally approve your application, but to require documentation of income later on. So the short answer is that “everyone” wouldn’t be able to get away with stating a low income — it worked for you because you had previous tax filings that documented your income status.

Second: Yes, whatever amount you actually pay in insurance premiums can be deducted as a self-insured health insurance adjustment. Basically you start with the total premiums charged by the insurance company, then subtract out whatever premium subsidy you are entitled to. The math is circular, so come tax time you either need to have appropriate software to figure it out for you, or do several iterations of a repeat calculation until the numbers balance.

20. john

Thank You,

When calculating my MAGI as a 1099 contract employee I am a bit confused.

It is my AGI but from there can I lower it with
– Self Employment Tax? ( full or 1/2)
– 401k Contributions ( IRA is NO But I Think 401k Is yes)

I am reading conflicting information on this.

• freelancer

Do you have untaxed social security income?
Do you have tax-exempt interest income (such as municipal bonds)?
Do you have untaxed foreign income?

If the answer to any of those questions is yes, then those amounts are added in to calculate MAGI.

IF the answer is no, then your MAGI is exactly the same as the AGI number on the bottom of the first page of the 1040.

21. Rita

Thanks for all the great information I hope you can answer this question. We are trying to estimate our taxes for year end since we have one or two items that we might be able to do before year end to reduce our income so we don’t fall over the cliff. How do I calculate what our actual premium tax credit is? I tried various websites, but it seems ambiguous at best. For instance how do I determine what the second lowest silver plan is? I was hoping Turbotax could help me out with this, but the forms for healthcare are not complete. If I can’t calculate the premium tax credit I won’t be able to calculate MAGI. Thanks.

• freelancer

Rita, you’ll get a form in January that will have the relevant numbers. For most of the year you can find out the benchmark rate by using the shop and compare tool on your exchange — but now that open enrollment is ongoing for 2015, I don’t know where to find the 2014 numbers at this point. (I guess this is a tax planning issue that’s easiest to deal with if you think about it before October.). However, you might wan to talk with a licensed insurance agent or broker in your area; I’m thinking that insurance agents might be more likely to work with printed rate sheets and still have those on file.

22. Rita

I actually found one listed for DC on line so I was hoping that the others would be out there and I just wasn’t searching properly. I was afraid the answer was that I should have thought of it before 2014 disappeared. I’ll try your good suggestion. If that doesn’t work I may estimate the one for 2015 and add a buffer. We’re in the same boat you are, 61 living on the east coast using a bronze plan. Not wishing my life away, but just waiting for medicare. Thanks for responding.

23. billyster87@gmail.com

“Freelancer | December 27, 2013 2:37 PM | Reply
Scott – the answer is yes, the IRA to Roth conversion will suffice to increase your income. But keep in mind that there is no penalty for overestimating your income — if you provide CoveredCA with an estimate at or above 138% of the FPL in order to qualify for a subsidized plan, and your 2014 income is less than estimated, your subsidy will be determined in accordance with your actual income. If your income is under the 100% FPL mark, you will be treated at tax time as if your income is exactly 100% of the FPL.”

First I calculated my estimated MAGI at \$16,750 (income plus traditional ira to roth ira conversion).I hope I calculated my MAGI correctly – not including any exemptions or deductions. Could you verify?

Second I have made a total of ~\$10,000 this past 2014 (income of ~\$7,000 plus traditional ira to roth ira of ~\$3,000). I have been taking a subsidy of over \$200/monthly. Does your quoted statement above mean that I will be considered at 100% FPL and have an even larger subsidy granted which would potentially lower the taxes I owe for the year of 2014?

• freelancer

I don’t have enough information to give you a specific answer, but I can tell you that there is a possibility that you will qualify for an additional tax credit, which could in turn reduce whatever tax liability you have.

24. john

Back to the MAGI for self employed ( 1099) individuals. Can you please clear up exactly what this is? From what I can tell it is

Income
– 1/2 Self Employment Tax

Is this correct? If I wanted to lower my AGI to meet subsidy guidelines and have a solo401k should I contribute as the Employee or The Employer? Does it not matter?

• freelancer

No, MAGI is this number from the 1040:

Here is a link to a the draft form for 2014: http://www.irs.gov/pub/irs-dft/f1040–dft.pdf

For most people MAGI will be the number on line 37.

If you have tax-free interest (generally from municipal bonds) you will have to add that number to the number on line 37.
If you have untaxed income from social security (line 20a) — you will have to add that number back in. (You would figure that number by subtracting the amount entered in 20b from the 20a amount, and then adding the result to your AGI.
If you have untaxed foreign income you would have to add that in — but that is something you would only have if you have been living and working abroad.

If you have none of the above, the amount is going to be equal to line 37.

Your business expenses are deducted, or not, on your schedule C. They are not factored into MAGI because they would have already been reflected on line 12.

The adjustment for self-employment tax is only one of many that might be entered on lines 23-25.

There is no change as to the rules as to how you contribute to a 401K — but I don’t know what those rules are. I suggest that you consult with a tax professional if you are uncertain as to how those should be handled.

25. You are very helpful but somehow after reading your reply to this question, I’m still not sure if contributing to a solo 401k or an IRA will lower MAGI for the purposes of reducing Obamacare MAGI. Can you tell us definitively? Thanks

• freelancer

If you contribute to an IRA or 401K, what line will you put that number on your tax form?

26. I assume your question to my question means that retirement contributions do not reduce this type of MAGI. If so, are you 100% certain? Thank you

• freelancer

No, I didn’t say that at all.

I don’t have a 401K so I don’t know your situation.

Did you have a 401K last year? Did you take a deduction for it? Where in your tax return did you take that deduction?

The MAGI thing is pretty easy — I don’t know how you can be confused. It’s whatever is on line 37 of your return, with only three types of untaxed income added back in.

27. I’ve followed your blog for months and remain confused. Under what scenario can someone contribute to a retirement account to reduce their MAGI for the express purpose of qualifying for a higher ACA subsidy? With all due respect, you never actually answer this important question directly and plainly. I don’t believe anyone actually knows the answer to this. Regardless, this website is a great source of information and I thank you!

• freelancer

James, rather than playing games and debating with me, why don’t you read what I have written, and look at the tax returns.

I have SEP IRA and I take that as and will take that adjustment on line 28 of my tax form.

MAGI isn’t a number that can be reduced — MAGI is the number that you get after you add one of three things to AGI, which is what is on line 37 after you have subtracted any and all items on lines 23-35 from the number on line 22.

You can reduce your AGI by maximizing your deductions on lines 23-35. That includes two types of retirement savings: “Self-Employed, SEP, SIMPLE, and qualified plans” on line 28, and IRA deduction on line 32.

I have no clue as to whether or not your 401K would be something that you can deduct on line 28 or not. Look at last year’s return to see how it was handled then.

Or get advice from a professional.

28. For those looking for the straightforward (no games) answer… Yes, 401k contributions as well as IRA contributions will, in effect, reduce your MAGI which may increase your Obamacare subsidies.

29. Jay

I am self-employed and purchased a metallic silver health plan on the exchange that was richer in benefits than the Second Lowest Cost Silver Plan (SLCSP). I want to know if I can deduct on line 29 of Form 1040 the premium that exceeds the SLCSP. If so, how do I do this since it will impact AGI/MAGI and begin the circular calculations all over again.

I used TaxAct software and it performed the circular calculations but it leaves me with a self-employed health insurance deduction of only the amount that I paid net of the Total Premium Tax Credit for the SLCSP. Calculations follow:

SLCSP \$6,400
Total Premium Tax Credit: \$5,866 (consisting of Total of Advance Payments of \$5,016 plus Net Premium Tax Credit of \$850)
Amount Shown as Self-Employed Health Insurance Deduction (Line 29 of Form 1040): \$534

Premiums Paid Out-of-Pocket for Year: \$3,223

In effect, it appears I am losing a portion of the self-employed health insurance deduction for premiums I paid for the plan richer in benefits than the SLCSP. Any assistance will be greatly appreciated. Thank you in advance.

• freelancer

Jay, you can take the full net cost of premiums you paid for all qualified health plans, less the tax tax credit — no matter what plan you chose. Your total premiums are based on what you actually paid, but your tax credit is calculated from what you would have paid under SLCSP. However, your line 29 deduction can be no more than your net income from self employment — that is, you can never write off more than you actually earned.

I don’t use TaxAct, but either the software program is doing the calculation wrong or (more likely) the instructions are confusing and you have not entered all information where it should be.

Did you enter the total amount charged in premiums any where on the tax form or software? That is, somewhere you should have entered what the insurance company actually charged for the premiums, not what you paid out of pocket after factoring in the subsidy. I’d think that you would have started by entering \$9089 as your line 29 amount, then entered \$6400 as the SLCSP amount for the Form 8962 calculation, and then subtract the total tax credit from line 29. Of course I think the software should be doing that for you — but I think your first step should be to go back and figure out if the problem was that you forgot to enter the total premiums at some point.

• Jay

Thank you Freelancer for the prompt response. I appreciate it. TaxAct asks the following to calculate the self-employed health insurance deduction:

The premiums paid which is where I initially inserted the out-of-pocket premium of \$3,224. If I insert \$8,240 (that is, the out-of-pocket premium of \$3224 plus advance subsidy of \$5,016) this equals the total annual premium for the plan. The software is then calculating a deduction of \$5,551 and no credit at all which makes no sense.

On From 8962 the following inputs were required:

This enabled the software to calculate both the remaining net premium tax credit of \$846, my contribution amount \$534 (which is what is showing up as the self-employment health insurance deduction) and a calculated MAGI.

If I were able to force the full \$2,374 (it’s a dollar different than we discussed earlier) onto Line 29 as the self-employment health insurance deduction (which is the \$534 contribution and the different between the total plan cost of \$8,240 less \$6,400 for the SLCSP) this would not technically work since that creates a new MAGI amount which will change the contribution amount and the total premium tax credit and on and on.

I may have to try a different software program. Again, thank you for taking the time to offer your thoughts.

• freelancer

Sounds like a problem with the software. The software should be subtracting the \$5016 from the \$8240, and then sending the balance to line 29.

I use H&R Block software, but I know already that my AGI for 2014 is too high and I won’t qualify for any credit, so I won’t be able to test the credit calculation on my own return. (My earned income is borderline at the 400% level in any case, but in 2014 I also had some unanticipated capital gains that will push my MAGI up significantly, so I’m out of the game entirely for this year.) But I’ll see if I have time to do a run through using hypothetical numbers to see how the software handles everything.

One problem with the software is that the initial line 29 number (before calculation of the tax credit) might be significantly higher than the total ACA premiums charged for various reasons. For example, imagine someone who has high cost, unsubsidized COBRA coverage that expires mid-year. So for the first 6 months the person is paying the higher COBRA premium, and then when that expires they go onto an exchange plan — meaning the taxpayer is only eligible for credits for 6 months out of the year. So the total amount that taxpayer paid for insurance in a given year could very well be more than the total amount that their exchange-purchased carrier charged — and the tax software really needs to be written to cover all possible bases.

I guess this year is a good trial run on software — maybe if we all test our own packages, we’ll be able to come to a consensus as to which is best.

30. Jay

Thank you Freelancer. I sent an email to TaxACT but who knows if it will get the response I seek.

The only entry on Line 29 for me should be the difference in premium between the Silver plan I purchased and the SLCSP plus my contribution (which is driven by MAGI). This has turned into a very frustrating task.

I also tried TurboTax online and when I got to the Healthcare screen it grays out (others have reported the problem too).

31. Jay

Hi Freelancer, I did not receive a reply from TaxAct to what appears to be an error in their software so I performed the iterative computations as prescribed in Section 5.01 of Internal Revenue Bulletin 2014-33 Rev. Proc. 2014-41. It worked after Step 6.

• freelancer

I assumed you did the calculations by hand? Or did TaxAct allow you a way to choose the iterative calculation?

I did run numbers quickly through HR Block. I assumed a single taxpayer, self employment net income of \$30,000; a monthly premium of \$500 (\$6000/year); a maximum SLCSP monthly amount of \$400 (\$4800/year); and an advanced payment subsidy of \$200 (\$2400/year). No other numbers on the form.

HR Block calculated a premium tax credit owed of \$1122 and a self-employed health insurance deduction of \$2120. If you add those two numbers to the advance subsidy already paid, you get \$5642 — which is \$358 short of the \$6000 total premium cost.

I haven’t done the math on this independently, but I am thinking that the software is doing the “alternative” calculation described in my post at https://obamacareguide.wordpress.com/2014/07/25/self-employed-health-insurance-deduction-alternative-calculation (the one where the taxpayer stops at the point of calculating minimum credit and minimum deduction). The \$358 discrepancy is with the range of errors I found when I was doing the math to prepare that blog post – so I’m fairly sure that’s why the math isn’t working.

Personally, I think that if you pay for software, you should expect better. If IRS says there are two acceptable approaches, the software should be able to give the person the results from both and the option to choose. So as it stands now, I cannot recommend HR Block to anyone who might be owed a credit.

[*Updated — I tried again the following day and the software did not seem to be reconciling the line 29 deduction at all – so now I think that I made a mistake and was accidentally reading the wrong line on the 1040. It now appears that the H&R Block software is not making any reconciliation at all.]

However, I would note that H&R Block is continuing to update its software – it says that another update is expected January 22nd. So maybe they will fix that.

As I noted in my previous post, I won’t qualify anyway — so it won’t really matter to me. But certainly it is in the interest of anyone who is entitled to a credit to do the full iterative calculation– even if you have to work out out on your own.

32. Jay

Thank you for testing H&R Block software. I was going to try it since I was curious. At least for now I needn’t bother.

I did do the calculations manually. I see nothing in TaxAct that allows for choosing iterative calculations. I will let you know if they respond to my email about why the calculations do not show a deduction on line 29 for net out-of-pocket premiums (after reconciliation of the credit) plus the portion of the SLCSP premium that the taxpayer is responsible for.

Turbo Tax did respond to my email (I was using their online calculators) about being prevented from getting to input any data into Form 8962. In their response all they did was repeat the steps contained in their FAQs and were silent about the system glitch I experienced.

• Jay

Hi Freelancer,

Below is the response I received from TaxACT® when I asked why in their program is line 29 (which is a calculated line) for the self-employed health insurance deduction only populating with the taxpayer’s premium contribution from Line 8a of Form 8962.

Essentially their response is stating there is no deduction on Line 29 for any premiums paid above the SLCSP.

Response from TaxACT® (on 01/15/15):

The amount reported for Self-employed health insurance deduction on Line 29 Form 1040 is your Annual Contribution for Health Care that is calculated and reported on Line 8a of Form 8962. The remainder (total premiums paid less this amount for Annual Contribution for Health Care) is covered by the Premium Tax Credit (PTC) on Form 8962, where the difference of your Total Premium Tax Credit (Line 24 Form 8962) less the advances you received (Line 25 Form 8962) is reported on Line 60 of Form 1040.

Please note that per page 2 of IRS Instructions for Form 8962 in determining your Premium Tax Credit, your “Monthly contribution amount is the amount you would be required to pay as your share of premiums each month if you enrolled in the applicable SLCSP” and “The premium for the applicable SLCSP is the second lowest cost silver plan premium offered through the Marketplace where you reside”.

• Jay

P.S. to my above post…

I see nothing in the IRS material that limits specified premiums to the total premiums paid only up to the SLCSP. Internal Revenue Bulletin 2014-33 Rev. Proc. 2014-41 defines specified premiums as premiums for a specified qualified health plan or plans for which a taxpayer may otherwise claim a deduction under Sec.162.

• freelancer

Jay, I’ve called H&R Block customer support and the rep that I talked to seemed to be aware of the issue and that it was being addressed in the next software update, currently scheduled for January 22nd. So I will wait for that download and try again. I use the “Premium” version of the software – the version advertised for self-employed. The exact question I asked was whether the software could reconcile the self-employed health care deduction with the ACA premium tax credit.

It is typical for H&R Block to push through several upgrades in the first few months of the year and ordinarily I would not be doing my taxes until March.

I did mention to the customer service rep that I am a blogger and would be reporting online about whether their software can handle this transaction! (I will definitely write a separate post after the software update– but if it doesn’t work, I’ll call H&R Block again to verify).

• freelancer

Sorry to hear that TaxACT seems to have gotten things so wrong! If you look at Form 8962 – http://www.irs.gov/pub/irs-prior/f8962–2014.pdf — you will see that there is a column A (Premium Amount) and a column B (Annual Premium Amount). Column A is the amount corresponding to your plan, while Column B is the amount corresponding to the SLCSP. Column A could be more or less than Column B — for example, I have a bronze plan, so my column A amount is roughly \$100 less than my Column B amount.

Unfortunately, I’ve played around with the H&R Block software some more and I can see that they also have it totally wrong – even worse than what I reported yesterday. So definitely don’t invest in their software either! I’ll try to contact them for more information. (This makes me wonder what else the software has gotten wrong over the years!)

33. Jay

In case there are other reading our correspondence who use TaxACT I am posting below their response plus my reply.

TaxAct wrote (on 01/15/15):

In response to your e-mail about the Self-Employed Health Insurance deduction: You will still need to enter the amount of the premiums you actually paid in the screen that reads “Business Income – SE Health Insurance”. Filling in the Form 8962 will not populate this figure. See the instruction below about reaching that section of the software, should you need it.

To enter the amount for Self-Employed Health Insurance for Schedule C (Form 1040):

From within your TaxACT return (Online or Desktop), click on the Federal Q&A tab
Click Business Income to expand the category and then click Business income or loss from a sole proprietorship
Click Add to create a new copy of the form or click Review to review a form already created
Continue to the screen titled Business Income – SE Health Insurance (to reach this screen quicker, click No on any screen that offers that option) and then click Yes and the following screen will provide information and a place to enter the amount of premiums paid. (Note, if you had been through the Schedule C Q&A previously, you may instead come to a screen titled Business Income – Topics, where you can click Jump to Topic next to Self-employed health insurance.)
Click Continue
On the following screen, click Yes if you need to also enter information for a qualified long-term care insurance plan. Otherwise, click No.
The last screen in this section of the Q&A, SE Health Insurance – Deduction, will reflect the amount of your self-employed health insurance deduction that will appear on Form 1040, Line 29.

Thank you but I had followed the instructions you provided when I initially input my health insurance premiums. I input for self-employed health insurance my out-of-pocket premiums for the year which consisted of: (1) the subsidy payments paid to the insurance company and (2) premiums for the Exchange plan I chose which were above the amount of the SLCSP. If I insert any other amounts (for example, the total premiums before subsidy of either the plan I purchased or the SLCSP) then the calculations make no sense.

I also properly completed the inputs for Form 8962. The software then reconciled the premium tax credit and left me with only a self-employed health insurance deduction equal to my share of the contribution as shown on Form 8962 for the SLCSP.

Note: For a taxpayer that purchases the SLCSP this will not be an issue as the amount on Form 1040 Line 29 will be correct and equal only to the premium contribution for the SLCSP.

There is no place I can see to make a manual adjust to what appears on Line 29 to also reflect the difference paid in premiums for the cost of the higher level silver plan versus the cost of the SLCSP. In other words, for taxpayers that pay the higher premiums for a richer health plan your software is in effect ignoring a premium that should appear on Form 1040 Line 29 for a self-employed health insurance deduction.

34. Jay

Thank you Freelancer for the information about calling H&R Block. H&R Block was running TV ads to come in to discuss how healthcare premiums would impact tax returns. Unless their associates were using software different than what is included in the “Premium” version their advice may have been not quite correct.

I went with my manual calculations for the purpose of paying estimated 4th quarter 2014 income taxes. We’ll see what transpires with different software packages in the coming days/weeks.

• freelancer

Well, it’s very possible that the staff at the H&R Block offices are able to give good advice and they may have in-house software to work with that is more sophisticated than the software packages sold to consumers. I do have to say that the rep that I spoke with seemed to understand my question immediately — I was surprised that I didn’t have to offer more explanation. But I don’t know whether that means that she is very knowledgeable, or whether it is simply H&R Block’s standard response to all questions to tell customers to wait for the next update.

I’ve created a new topic at https://obamacareguide.wordpress.com/2015/01/15/tax-software-fail/ so we can carry on this discussion in the comments to that section.

35. Jay

Thanks Freelance and for the mention in the new topic. I will post there if TaxACT gets back to me.

36. Jay

Hi Freelander, I did not want to put this in the new topic since it relates to a response from TaxACT to posts appearing above. .

TaxACT’s reply only citing excerpts of the Premium Tax Credit calculation in IRS Publication 5187.

I replied as follows (on 01/15/15):

Thank you but the issue is not about the Premium Tax Credit. It is about your software excluding from Form 1040 Line 29 as a Self-Employed Health Insurance deduction my expense for the differential in premium between the health plan purchased (that is, a higher silver plan) and the SLCSP. Your software is limiting my deduction on Line 29 to the premium contribution amount (as shown on Form 8962) for the SLCSP.

t

37. young

Hello Freelancer,
can you tell me if I can use some portion of loss carry forward to qulify preminum tax credit?
we have \$400k loss carry forward to use for 20 years, we think we may end up this year making \$200k. I know I can offset my gain with it. but I wonder if we can just use 178k to get maximum tax credit.

• freelancer

You’ll need to talk to a tax professional on that. I can tell you that the loss carry forward will reduce the MAGI — and the lower your MAGI, the higher the tax credit –but I don’t know the rules about how much loss you can carry forward in a given year. So that’s the part you would need to clarify with a tax person.

38. Dean

freelancer

Thank you for all your work on this. You have helped me to at least get started in the right direction.

However, I am wondering about your definition of the SPECIFIED PREMIUM? It seems to me that, because the final allowable total premium tax credit is determined on the basis of the second lowest cost silver plan (SLCSP) premium, the SPECIFIED PREMIUM should be the SLCSP rather than your “actual total premiums charged for health insurance coverage.”(from one of your July 25, 2014 posts)

This would seem to be confirmed by looking at Form 8962 (Premium Tax Credit form) where, on line 11, the Annual Maximum Premium Assistance (Column D) is determined by subtracting the Annual Contribution Limit (Column C–which by my calculation also turns out to be the Form 1040 Line 29 Self-employed health insurance deduction) from the Annual Premium Amount of the SLCSP (Column B).

Is this is the case, it certainly would have made things much easier if this had simply been noted in the Rev. Proc. 2014-14 that you cited. Perhaps Publication 974 will spell out more clearly what the SPECIFIED PREMIUM is?

• freelancer

Dean, there are two separate tax sections involved here..

1. The amount that a self-employed person may take as an adjustment from their taxes (on line 29 of the 1040). That is equal to the total amount of premiums that have been paid for qualified health plans, and it is that section of the tax code where the “specified premium” language comes from. By itself, that has nothing to do with the advance tax credit. So let’s say that your earnings are too high to qualify for any tax credits — we’ll say that your AGI is \$90,000 a year — and let’s say that you buy a gold level health insurance off exchange policy and have a policy that costs you \$8400 a year. You would be able to subtract out that full amount from your income.

2. The tax credit comes from a different part of the tax code — the ACA provisions — and is a way the government helps out people at lower income levels by effectively reducing premium costs. However, nothing in those provision takes away your right to choose high quality insurance. Let’s say your AGA is around \$44,000 a year, but you want that gold-level policy — maybe you have a chronic medical condition that requires you to take expensive medication, so you’ve figured out that you want the lowest possible deductible and copays. If you buy the policy off-exchange, you still have the right to take all of your premiums – that \$8400- as an adjustment.

Now let’s say that you buy your insurance on-exchange, so now you are eligible for a tax credit. Because it is a gold policy, the government isn’t going to allow you to use that \$8400 figure to calculate your credit. They’ve set a maximum — the 2nd lowest cost silver plan – and let’s say that for you, that is a \$6000 annual policy. So your maximum tax credit is set against the \$6000. Let’s say hypothetically that is about \$4000. (My math on the credit won’t match actual tax numbers — I’m just using hypothetical numbers). A taxpayer who buys that 2nd lowest cost silver plan will end up having paid \$2000 for health insurance for the year, after accounting for the tax credit.

But if you have that more expensive gold plan, your out-of-pocket, post credit cost is more than double that amount — it’s \$4400. That is the amount that you will be able to enter in line 29. If “specified premium” meant the 2nd lowest cost silver — then what would happen to that extra \$2400 that you paid? The government is not taking away that money or forcing you to to go on the cheap plan with the higher deductible and the smaller network — all they are doing is capping the amount that they are willing to pay to help you buy whatever insurance you want.

The problem is that you can’t know your AGI until after you already know the tax credit amount, and you can’t figure your tax credit without knowing the AGI. So that is what he iterative calculation is about. If you are eligible for a tax credit, you aren’t going to be able to have an adjustment of \$8400, because IRS isn’t going to allow you to claim an adjustment based on what *they* are paying. But again, they aren’t going to penalize you for opting for the higher-cost plan.

When you are done, under my hypothetical, then the sum of the the line 29 amount added to the tax credit amount will be \$8400, or within a dollar of that amount, for a taxpayer who has gone through the calculations to maximize their credit. So if the math comes out to a \$4200 credit instead of \$4000, then the line 29 amount ends up being \$4200 instead of \$4400. Or if the tax credit is less — let’s say only \$3400 — then the line 29 amount would be higher – \$5000.

I hope this makes more sense to you. Again, the term “specified premium” only relates to the line 29 adjustment. It is not drawn from Form 8962, and it is possible that some taxpayers may have insurance payments during the course of the year that aren’t reflected on that form. (For example, if they only had an exchange policy for part of the year, and bought insurance off-exchange at other times.)

39. Dean

freelancer,

Thank you for the extended reply. I know you are correct in stating that the “specified premium” language is from the business write-offs side of the code. Nonetheless, while everything you say sounds very reasonable, I am not convinced my method does not work (at least it seems to work for my particular situation).

As I perform the Rev. Proc. 2014-14 calculations using, as you recommend, the Column A annual total amount from Form 8962 rather than the Column B amounts as the SPECIFIED PREMIUM, I come up with the exact same dollar figure for the Line 29 Self-employed Health Insurance Deduction that I came up when using the Column B total. The difference is in the premium tax credit amount. Using your “actual total premiums charged” method, I come up with a number that seems very low, whereas, when I use the SLCSP number, I come up with the exact same figure that I get for the Form 8962 Column D & E annual totals. In other words, using your method, I come up with the correct Line 29 entry, while my method (at least in my case) yields both the Line 29 entry and the actual Total Premium Tax Credit (Form 8962, Line 11 Column D & E, plus Line 24).

Once again, thank you for all your work in deciphering this puzzle.

• freelancer

Are you working with a tax software program or doing the calculation on your own? You have to use the SLCSP number for figuring the tax credit. So I am wondering if you are entering the wrong number somewhere else along the line.

Also, is your “specified premium” less than or more than the SLCSP? If you opted for a bronze plan or the lowest cost silver, then that would cause problems if you didn’t use the SLCSP for the tax credit calculation.

Again: the self-employed health insurance adjustment and the tax credit calculations are two different things. The iterative calculation is just the way you do the math to reconcile the two amounts if you want the tax credit, or if you received advance premium credits.

40. Jamie

Hi Freelancer,

I am in the process of working on our 8962 to determine eligibility for a premium tax credit. I was wondering if you knew why the 2014 Poverty Guidelines provided in the 8962 instructions is different than what is published by the Federal Register dated 1/22/2014. What number do you use?

• freelancer

You need to use the FP guidelines that were in effect at the time open enrollment began — so for 2014 that would be the 2013 FP Guidelines. The 2014 Guidelines will govern next year when you file your 2015 return.

41. Denise

Can someone help me on this. It seems simple but I can’t find an answer anywhere online. I am 64 and applied to Obama-care last year for health insurance. My husband is 66 and on Medicare so he doesn’t need it. When I report our total household income, mine is cut and dry from what I receive from my Social Security check every month. However, on my husbands Social Security check, every month SS deducts 104.00 for his Medicare premium.

So my question is, do I report the gross or net of his social security income on the Obama-care site as income? This is a difference of 1,260.00 per yr. in income and makes a difference on the subsidy I receive. I think I may have done it wrong, I need to send verification of income in, and I don’t know what is the correct amount that should be reported. THANKS so much!

• freelancer

What is total annual household income with or without that \$1260?

42. Rita

Hi freelancer – Taxes are done. Just wanted to thank you for all your valuable information. It really helped me to understand how it all worked. Rita

43. Steve T

Revised 1095-A from Covered California
I notified Covered California in May 2014 of a change in my MAGI so that I would no longer receive a Tax Credit Subsidy for the remainder of the year. It was to take effect starting in July, 2014. The tax credit subsidy was deducted for the final time on my June 2014, Blue Shield Invoice.
Upon receiving my 1095-A for 2014 it showed a \$337 credit for five months rather than six. I filed my Federal taxes based on that 1095-A which was reported to the IRS.
Today I received a corrected 1095-A from Covered California showing I received a Tax Credit Subsidy for six months. The corresponding form clearly states I do not need to notify the IRS or file an amended return (Result is \$337 in my favor).
Does this mean since it was Covered California’s error, I will not be penalized or will it show up on next years 1095-A?

• freelancer

I have no clue… but I’d suggest that you simply keep a copy of the amended form and wait & see. Worse case scenario is IRS sends you a notice saying you owe \$337 or thereabouts.

44. MSB

2015 TurboTax Deluxe Working Fine

I downloaded the desktop version of TurboTax Deluxe (Mac) 2015 and filled out my taxes today and am pleased to say that it is working fine, with just a couple hiccups. For my taxes, the final SE Health Insurance Deduction comes within \$15 of my iterative spreadsheet–certainly close enough to not care about the difference. In filling out tax forms with schedule c this early, you have to navigate through a number of warning screens and offers to upgrade, but it all works well so far. The only thing that didn’t work so well was after the Easy Step process, the SE Health Insurance Deduction is not calculated until you manually open the 1095-A and associate that form with your schedule C, AND list the months (01-12) that you had ACA insurance. Not a big deal, but that should get into the Easy Step process in time.

To sum up, TurboTax deluxe does fine with Schedule B, C, D, and the host of health insurance related forms (8962 and 1095-A.

45. Can you give me some advice? I used H&R Block software for 2014 and was confused what to do about my 1095-A. It ended up filing my taxes without the 1095-A at all, and I just now discovered this while doing my taxes for 2015. I see that I need to file an amended return for 2014 to figure the premium tax credit along with my self-employment deduction, but I know the H&R Block software won’t work. What can I do? I tried to follow the instructions on Form 974 myself to do the calculation by hand, but it was beyond me. Is there any online calculator that will re-figure just those numbers for me?

• freelancer

TurboTax and Tax Act will both do the calculations accurately in most circumstances.