Losing SEHI

[Snaggletooth]

A taxpayer chooses to deduct SEP retirement plan. And in so doing, some of his SEHI adjustment is lost. Can the "lost" portion be added to Schedule A medical deduction?

[Lion]

If you're saying what I think you're saying, then Yes. However, knowing how you usually present issues to us, maybe No.

If your client contributes to a SEP and therefore decreases his SE profit as computed for SEHI adjustment purposes which in turn decreases the cap on the SEHI adjustment so that the tentative adjustment is higher than the cap/SE profit, then your software should be moving the "excess" to Schedule A.

Did you see the results of the adjustment with AND without a SEP contribution? If so, follow the flow.

I will admit that trying to answer what I think you're asking has confused me, and now my head hurts! So wait for someone with more SE experience to weigh in.

Are you asking a tax question, or are you asking how to enter in your software?

[RWG1950]

Looks like a YES answer to me.

[New York Enrolled Agent]

[QUOTE=Lion;n312782]If
If your client contributes to a SEP and therefore decreases his SE profit as computed for SEHI adjustment purposes which in turn decreases the cap on the SEHI adjustment

{QUOTE]

Lion - reduces gross income, not SE profit - agree?

[Snaggletooth]

Thanks to all respondents. Lion, yes, I am unfortunately somehow known for cumbersome phraseology and I suppose its my own fault, bad as I might try to improve. In spite of that, you have been consistently one of the most helpful posters who try to help and you are much appreciated.

You have the particulars correct, except I have Drake and there is no evidence that Drake is taking the shortage and automatically adding it to Schedule A medical. Maybe other software does this, so I took it upon myself to manually input a higher amount. Not many people can exceed the 7.5% threshold anyway but some who have high bills or expensive insurance can do so. If there is a chance for tax planning, it is good to cram as many payments into the given year, even if they have to borrow to do so.

[Lion]

[QUOTE=New York Enrolled Agent;n312784]

If
If your client contributes to a SEP and therefore decreases his SE profit as computed for SEHI adjustment purposes which in turn decreases the cap on the SEHI adjustment

{QUOTE]

Lion - reduces gross income, not SE profit - agree?

I do agree!

[FEDUKE404]

The SEHI adjustment is a function of Sch C income / related deductions. You don't "lose" anything any more than you "lose" deductible medical expenses when your AGI increases.
My software automatically transfers the remaining potential SEHI costs (think IRMAA and shrinking Sch C income) so that what is left over of my high Medicare premiums after SEHI use is available for Schedule A. Other than entering my "insurance costs" in the Sch C area, there is nothing more I need to do re SEHI or Sch A medical.
Can't speak for Drake.

[Uncle Sam]

Here is the specific instruction for this item from the 2025 IT-201 instructions, Page 8

"New York subtractions Line 25: Taxable refunds, credits, or offsets of state and local income taxes If you received an inflation refund check from the Tax Department and included the check amount in the calculation of federal adjusted gross income reported on line 19, then enter that amount on line 25. Checks were mailed in the fall of 2025. For more information, see www.tax.ny.gov (search: inflation)."

[Snaggletooth]

This topic gives rise to a problem with Drake. It is now February 5th and the SEP item is still "in development." Cannot reach them on the phone. Cannot file the return. I wish Phil still was around.