PTC Payback

[Burke]

TP has to repay entire PTC for 2016 since he did not qualify for subsidy due to income. He does not have to pay additional tax, as his withholding/estimated covers the entire liability and there is still a refund. He qualifies to itemize and can deduct medical expenses, including health insurance premiums as they are over the threshold. I know you can add the payback to eligible medical expense, but since the withholding was paid in 2016, can he put it on the 2016 return? Or does he have to wait until 2017 to claim it?

[ATSMAN]

TP has to repay entire PTC for 2016 since he did not qualify for subsidy due to income. He does not have to pay additional tax, as his withholding/estimated covers the entire liability and there is still a refund. He qualifies to itemize and can deduct medical expenses, including health insurance premiums as they are over the threshold. I know you can add the payback to eligible medical expense, but since the withholding was paid in 2016, can he put it on the 2016 return? Or does he have to wait until 2017 to claim it?

I did one the other day and the PTC payback was close to $1400. I added that to the 2016 Medical expenses.

[TaxGuyBill]

I'm not quite sure what you mean, but the repayment of the Premium Tax Credit always counts as a Medical Expense on the current year return, regardless of refunds and withholding.

[Burke]

I had one a couple of years ago and that is what I did. I tried to research and found one site which indicated it had to be claimed in the following year; but it wasn't an authoritative source that I felt I could rely on. I could not find any IRS source pertaining to this issue. I might run it by NATP research just to see what they say, out of curiosity. It seems logical that it might be claimed in 2017 if the TP had to actually pay additional tax with the 2016 return because of it, but that kind of makes it complicated. Thanks.

[rtsietsema]

Possible SEHI deduction as well

I don't have the issue yet, but I have a client who is self-employed currently receiving advance payments. In the likely event, due to fluctuating income, he may have to pay back part of the credit I ask the questions.....

If we take the view to add it to medical expenses, could it also be taken as a self-employed health insurance deduction as well? And if so, in which year would you take it? Does it depend on owing taxes because of repayment, or getting a refund of excess with-holding? In effect he is paying for additional premiums toward health insurance....

A theoretical question question only.

[BP.]

self-employed currently receiving advance payments

Some instructions here, starting on p. 52:

https://www.irs.gov/pub/irs-pdf/p974.pdf

[TaxGuyBill]

Yes, the repayment is added to the SEHI deduction, on the current tax return (2016).

It does not depend on refunds, withholding or anything else.

Depending on what software you use, it may automatically do it (ProSeries, and I think Lacerte, do it automatically).

[Burke]

Regarding the PTC payback inclusion in medical expenses, it is addressed in Pub 502 and is taken in the current year. Looked everywhere but here.