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SS lump sum payment and Premimum Tax Credit Issue


I have a client that received a lump sum social security disability payment in 2019 for years 2016, 2017,2018, and 2019. They also had health insurance through the marketplace and received a 1095-A. Their 2019 taxable income is zero. My understanding per research is that the entire lump sum has to be included in modified AGI for the premium tax credit and a section 86(e) election for the lump sum social security payment has no affect. This of course causes a very large repayment. Is anybody aware of any recent tax law changes that would help in this situation?  This is a MFJ return also.

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3 Replies 3
Level 15

Paging @TaxGuyBill - he's our resident expert on all things APTC.

You can try splitting the return to MFS to see if it helps.


Former Chump... umm.... AllStar.
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Level 12

As was mentioned, all you can really do is try out filing Separately.  Although that disqualifies the credit, the lower-income spouse may have a lower repayment of their 50% portion of the Advance credit.  But filing Separately may cause other tax, such as taxing some of the Social Security.

In the event they have any "earned" income from a W-2 job or self employment profit, contributing to a Traditional IRA may lower MAGI.  If you can get MAGI below 400%, that is what you are aiming for.


Thanks for the help.  The normally "fixes" like putting money in a IRA like you said won't work since they have no positive earned income.  Looks like I get to make a call with bad news.  I thought we were doing taxes, not health insurance..........

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