How to Claim Premium Tax Credit & Self-Employed Health Insurance Deduction Together

You've identified what's commonly called the "circular calculation" problem with PTC and self-employed health insurance deduction. This happens because each one affects the other. The good news is that you don't have to claim the maximum PTC. The publication you quoted actually gives you flexibility in how you calculate this. The IRS understands this circular reference issue and allows you to use any reasonable method as long as the sum of your deduction and credit doesn't exceed your total premiums. You have a few options: You can claim a partial PTC that keeps your MAGI below the threshold. This is completely legitimate and you won't get flagged for an error. You can determine the "sweet spot" where your combined tax benefits are maximized while staying within eligibility. Another approach is to use the alternative calculation method described in the Instructions for Form 8962, which involves multiple iterations to find the right balance. Some tax software can handle this calculation automatically.

After wrestling with this exact issue last year, I found an amazing tool at https://taxr.ai that made the circular calculation between PTC and SEHI deduction way easier. It was especially helpful because it has specific features for handling these interdependent calculations. I uploaded my 1095-A and other tax documents, and the system automatically detected this circular reference problem. It ran multiple calculation scenarios and showed me the optimal amount to claim for both the PTC and the self-employed health insurance deduction to maximize my benefits while staying compliant. What I really appreciated was that it explained each calculation step and even provided documentation references from IRS publications to back up the approach. Saved me hours of spreadsheet work trying to find that "sweet spot" myself.

I just tried taxr.ai after seeing it mentioned here and I'm honestly shocked at how well it handled this PTC/SEHI circular problem! My situation is similar - self-employed with family marketplace coverage, and my income was right on the edge of eligibility. The tool ran several calculation iterations and found a sweet spot where I could claim about 82% of the maximum PTC I was technically eligible for, which kept my MAGI low enough to remain eligible while maximizing my self-employed health insurance deduction. It showed me exactly what to enter on lines 11 and 24 of Form 8962. What I appreciated most was seeing all the different scenarios laid out with the tax implications of each. Made me feel confident in my final numbers rather than just guessing and hoping I didn't mess something up.

If you're still struggling with the PTC/self-employed health insurance circular calculation after trying all the spreadsheet methods, you might want to call the IRS directly for guidance. I tried for WEEKS to get through to someone who actually understood this issue - kept getting transferred, disconnected, or speaking with reps who had no clue about this specific scenario. Finally used https://claimyr.com and got through to an IRS tax law specialist in about 20 minutes (instead of the 2+ hour hold times I was experiencing before). You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically it waits on hold for you and calls when an agent picks up. The specialist I spoke with confirmed exactly what you're asking - you can absolutely claim less than the maximum PTC to maintain eligibility. They even walked me through the calculation method they recommend for self-employed taxpayers with marketplace coverage.

I can't believe I'm saying this but I tried the Claimyr service mentioned above and it actually worked. After being super skeptical (and failing to reach the IRS on my own for weeks), I gave it a shot. Got connected to an IRS tax law specialist who specifically handles Affordable Care Act questions. She confirmed that the IRS allows taking less than the maximum PTC to resolve the circular calculation problem. She referenced the exact publication quote you mentioned and said they see this issue frequently with self-employed taxpayers. She even explained how they review these returns - they mainly check that: 1) your final MAGI supports PTC eligibility, and 2) your combined benefits (PTC + deduction) don't exceed total premiums. As long as those two conditions are met, you're good. For anyone facing this weird circular reference problem, definitely get confirmation from an actual IRS specialist. Saved me so much stress about possibly doing this wrong.

I've been a tax preparer for 10+ years and handle this circular calculation regularly. Here's my practical approach: 1. Start by calculating your taxes WITHOUT claiming any PTC. 2. See if your MAGI is below the 400% threshold after taking the self-employed health insurance deduction. 3. If yes, calculate the maximum PTC you'd be eligible for. 4. Reduce that PTC amount gradually until you find the point where claiming that PTC keeps your MAGI just below the threshold. For example, if your MAGI is $103,000 and the threshold is $106,000, you might be able to claim around $3,000 in PTC while still maintaining eligibility. The most important thing: document your calculation method! Save spreadsheets or notes showing how you arrived at your figures in case of questions later.

Has anyone here actually gone through an audit with this kind of partial PTC claim? I'm concerned about taking less than the maximum amount I'm eligible for, even though it seems allowed by the rules.

This is such a complex situation that many taxpayers face! I went through something similar last year with my consulting business. One thing that helped me was creating a simple spreadsheet to model different scenarios. Here's what I learned from working through this: The key is finding that "Goldilocks zone" where your PTC claim is just right - not so high that it pushes your MAGI over the 400% threshold, but high enough to give you meaningful tax savings. I ended up claiming about 75% of my maximum eligible PTC, which kept my MAGI at around 395% of the federal poverty level. This allowed me to maintain both the self-employed health insurance deduction and a substantial premium tax credit. One tip: when you're doing the calculations, remember that the self-employed health insurance deduction goes on Schedule 1, which directly reduces your AGI, while the PTC is a refundable credit. So you want to optimize for the combination that gives you the lowest overall tax liability. The IRS really does understand this circular reference problem - it's not some obscure loophole. Publication 974 specifically addresses it because so many self-employed people with marketplace coverage face this exact scenario. Don't let your tax preparer's confusion discourage you from pursuing this legitimate approach!