ACA Advanced Premium Tax Credit

Technical topics regarding tax preparation.
#1
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Client has been enrolled in Obamacare for years. For year 2019, he foresees that his self-employed income will increase and it will cause his household income to just reach the maximum income limit. Therefore, he will not be allowed any Advanced Premium Tax Credit. (Based on my understand, the Advanced Premium Tax Credit is calculated based on taxpayer's income only irregardless of the above-the-line deductions that they will have when they file their tax return. Please correct me if I am wrong though)

However, he does plan to make full contribution to both his and his wife's IRA account in 2019. That, together with the deduction from self-employed health insurance premium deduction will greatly lower their AGI in their 2019 tax return. Because of that, a big chunk of the health insurance premium will probably be refunded to them when they file their 2019 tax return.

Under this situation, is there a way to include the deduction of the IRA contributions and the self-employed health insurance premium deduction into the calculation of the Advanced Premium Tax Credit so that they can get some of that in advance instead of having to wait to get the refund when they file the tax return?
 

#2
lucyko  
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Yes ; modified adjusted gross income (AGI less tax exempt interest and form 2555 income ) is used in the reconciliation process when completing form 8962 .This means IRA contributions ,and 1/2 self employment deduction is pulled out . You should suggest to your client this information be provided to the representative when they contact the marketplace for 2019 insurance. Based on your information they appear to be eligible for the monthly advance insurance premium subsidy . premium.

Suggest you review the instructions for form 8962 which has a lot of useful information pertinent to your situation
 

#3
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I fully understand the IRA contribution will affect the MAGI which will bring them the Premium Tax Credit (PTC) eventually when they file the tax return.

The question here though is how to make the IRA contribution be part of the Advance Premium Tax Credit (APTC). Based on my memory, the questions that the marketplace asks in order to calculate the Advance Premium Tax Credit are all about the income of the enrollee. They do not take the IRA contribution into consideration to come up with the Advance Premium Tax Credit.
 

#4
lucyko  
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If the marketplace does not take into account the IRA contribution (surprise to me ) then you will just have to wait until your clients taxes are completed. You will certain;y get the benefit of the IRA contribution as well as 1/2 self employment tax when the form 8962 is completed .

Why don't you just call the marketplace to resolve this question as you are basing your conclusion on your memory .
 


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