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Grandmabee is correct. The way this actually works is that it is all accounted for and reconciled on that year's return even though the excess is paid back (or refund received) in the following year.  The adjustment becomes part of the calculation for the deduction on Sch A or for SEHI.  Here's how it works: the total gross premiums for that tax year are reduced by the actual PTC that is allowed as calculated on the return. not the amount of advance PTC that was claimed during the year.  What that means is that if there was an excess claimed throughout the year, the premiums paid by the taxpayer out-of-pocket should have been higher, meaning that the Sch A medical deduction or SEHI are that much higher.  If the return shows that the taxpayer could have utilized more APTC that results in an additional refund, then his out-of-pocket for premiums should have been lower during the year, and therefore the Sch A medical or SEHI would be that much lower.  The tax program should be doing this automatically for you, but you should check to make sure this is how ATX is handling it.  My program does do this automatically, but I no longer use ATX.

If that isn't clear, here is an example:

  • Total gross premiums for year: $12,000
  • APTC utilized throughout year:   $7,000
  • Taxpyr prems pd during year:      $5,000 

If the amount of APTC used was the exact correct amount, then the taxpayer has a deduction of $5,000 for Sch A or SEHI purposes. 

If the taxpayer should have only used $4,000 of credit during the year causing a $3,000 payback, then the share of premiums he should have paid during the year should have been $8,000, and that amount would go to Sch A or to SEH I even though the $3,000 payback occurs in the next tax year.

If the taxpayer was entitled to use $9,000 of credit and therefore has an additional refund of $2,000 on his return, that additional $2,000 effectively reduces the $5,000 of premiums paid down to $3,000, and only the $3000 is allowed as a deduction on Sch A or for SEHI.

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Thanks for your comments:

I forgot to mentioned that the client is self-employed and takes a self-employed health insurance deduction on line 16, part II of schedule 1 of form 1040 for health insurance paid in 2019.  I was wondering if that same client could enter the repayment of excess advance payment of the premium tax credit from Part III of the 2018 Form 8962 that the client had to pay back in 2019?  I know that there can not be more deductions than income that is on Schedule C.

There are worksheets W and X in publication 974 and also in the ATX program. 

2018 Form 8962 has repayment of excess advance payment of the premium tax credit of $3857.  In 2019 an amended return was filed and the client owed $3503.  The payment was made in 2019.  

Another thought about this repayment is that the client was above the federal poverty line.

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The client's 2018 return does not show this repayment of advance payment of the premium tax credit on the original return.  On Form 1040X and amended return for 2018 it has an APTC repayment or amount owed of $3503.

I want to thank you again for your responses.

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