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12599: Advising Taxpayers About the Premium Tax Credit vs. the SE Insurance Deduction


How do I advise taxpayers about taking the PTC (Premium Tax Credit) or using the SE (self-employment) insurance tax deduction?

As a preparer you will want to explore the options available. You will need to look at the tax consequences for each action.

Some taxpayers may be eligible for both a self-employed health insurance deduction and the PTC for the same premiums. See Pub. 974, pages 57-75 for more details. 

Questions to ask include:

  1. How many people are in the taxpayer’s family and would need to be covered by insurance?
  2. What is the household income for the taxpayer?
  3. Where does the taxpayer’s household income fall in reference to the federal poverty line (FPL)?
  4. What is the comparison between the cost of private insurance and that of purchasing insurance through a state or the federal exchange?
  5. Will the taxpayer qualify for the Premium Tax Credit (PTC)?
  6. Does the taxpayer plan to take an advance payment of the PTC?
  7. If the taxpayer qualifies for the PTC, does the taxpayer also qualify for cost-sharing reduction (lower insurance payments, lower out-of-pocket costs)?
  8. Will the taxpayer qualify for Medicaid in the taxpayer's state?
  9. If the taxpayer could qualify for Medicaid, where does the resident state stand on Medicaid expansion?
  10. What kind of penalty will the taxpayer face if the taxpayer does not purchase health insurance?
  11. How will the PTC or penalty for non-insurance affect the taxpayer’s return?
  12. How will the deduction of self-employed health insurance impact the bottom line on the taxpayer’s return?

For more information, see the IRS website Affordable Care Act (ACA) Tax Provisions.

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