PTC + SE health insurance deduction circular calculation — how do you actually close it out?
freelance client got marketplace coverage in 2025, received APTC. her household income is volatile — she ended up higher than projected, so she owes some APTC back.
the circularity: PTC is based on MAGI, MAGI depends on AGI, AGI depends on SE health insurance deduction, SE health insurance deduction is limited to (premiums paid minus PTC).
IRS Rev. Proc. 2014-41 has the iterative method but it's painful to do by hand. Drake and Lacerte both solve it automatically but i dont fully trust the output.
anyone got a sanity check worksheet? i want to verify the software is actually iterating correctly.
3 replies
Rev. Proc. 2014-41 gives you two methods: iterative (recommended) and alternative. for most clients the iterative converges in 2-3 rounds.
manual sanity check: compute AGI assuming SE health = gross premiums (no PTC). that gives you a low MAGI → max PTC. then SE health = gross - PTC → recompute AGI → recompute PTC. repeat until PTC stabilizes.
in practice for a single-coverage client with premiums $600/mo you'll converge in 2 passes. for family coverage sometimes 3. if Drake shows the same number after one pass it's probably not iterating — check settings.
ran it by hand using your method. Drake was giving $2,350 SE health; manual iteration says $2,341. close enough — but confirms i should keep an eye on edge cases.
that $9 delta is likely rounding at each iteration step. Drake rounds intermediate values; manual usually carries full precision until the final. nothing to worry about.
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