IRS finalizes premium tax credit regs

The IRS has finalized regulations under Code Sec. 36B and Code Sec. 162(l) related to the premium tax credit. The temporary and proposed regulations (T.D. 9683; REG-104579-13), which were issued in 2014, provided:

(1) relief from the joint-filing requirement for married victims of domestic abuse or spousal abandonment,

(2) the methodology for indexing certain percentages used in determining the amount of and eligibility for the premium tax credit,

(3) certain allocation rules for reconciliation of advance credit payments and the premium tax credit, and

(4) guidance on the deduction for health insurance costs of self-employed individuals.

These regulations have been made final with only one technical correction.

Relief for married victims of domestic abuse or spousal abandonment

The premium tax credit may only be claimed by married taxpayers who file a joint return with his or her spouse. The final regulations maintain the exception for the limited and unique situations when the taxpayer is unable to file a joint return either because the taxpayer fears for his or her safety or, through no fault of the victim, can neither file a joint return because the nonfiling spouse cannot be located nor obtain a divorce or legal separation because sufficient time has not lapsed under state law. The relief is limited to three consecutive years.

Correction of computation of the limitation amount for self-employed individuals

Under Code Sec. 162(l), a self-employed taxpayer is allowed a deduction for all or a portion of the premiums the taxpayer pays during the tax year for health insurance for the taxpayer, the taxpayer’s spouse, the taxpayer’s dependents and any child of the taxpayer under the age of 27. The final regulations correct an oversight in the temporary regulations, which omitted a rule for situations where this deduction must be limited to his or her earned income from the trade or business that established the health insurance plan. The final regulations correct this oversight and clarify that household income for purposes of computing the limitation amount is determined by using a Code Sec. 162(l) deduction equal to the lesser of:

(A) the sum of the specified premiums for the plan not paid through advance credit payments, the limitation amount, and any deduction allowable for premiums other than specified premiums, or

(B) the earned income from the trade or business that established the health insurance plan.

SOURCE: 82 FR 34601, July 26, 2017.

Visit our News Library to read more news stories.