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