2027 Marketplace open enrollment: Build Each Self-Employed Client's Premium Tax Credit Income Estimate From the Books Before December 15
A premium tax credit income estimate for a self-employed client is a projection of 2027 modified adjusted gross income built from the books, not from gross receipts. Open enrollment for 2027 Marketplace coverage starts November 1, repayment caps on excess advance credits are gone, and a wrong estimate now costs the client every dollar of the difference.
Why this matters now
On 2026-10-30 CMS published its Plan Year 2027 Marketplace Plans and Prices fact sheet. It says open enrollment for HealthCare.gov coverage begins on November 1, 2026 and runs through January 15, 2027, that enrollees have access to about 100 plans from five to six insurers on average, and that people eligible for tax credits will have access to a plan with nearly 90 percent of the lowest-cost premium paid by the federal government. The same day, KFF published its nine things to watch for 2027 open enrollment, dated 2026-10-30, putting the average increase in finalized benchmark silver premiums at 13 percent, 11 percent in HealthCare.gov states, and noting that enrollees above 400 percent of the poverty line get no credit at all.
Two IRS items turn that into a bookkeeping problem. The IRS page on repayment caps eliminated for excess advance payments, last updated 2026-10-07, says that beginning with tax year 2026 taxpayers must repay the full amount of any excess advance payments of the premium tax credit. The old repayment limits for households under 400 percent of poverty are gone. And Rev. Proc. 2026-26, released 2026-07-21, fixes the 2027 applicable percentage table: 2.15 percent of household income at the bottom, rising to 10.22 percent for households between 300 and 400 percent of poverty. Treasury has also issued proposed regulations to conform the credit rules to the repeal; they are not final.
Consumer coverage of open enrollment explains plan tiers and the premium increases. What it doesn't cover is the figure a self-employed client types into the Marketplace application: expected 2027 household income. That number comes from the books, it sets the monthly advance credit, and when the 2027 return is filed in 2028 every dollar of advance credit the final number doesn't support is repaid. This article is the worksheet a CPA uses to produce that figure for each self-employed client before the December 15 deadline for January 1 coverage, with one client worked through.
The estimate is modified AGI, not gross receipts and not net profit
A self-contained definition first. Household income for the premium tax credit is modified adjusted gross income: the AGI on the tax return plus tax-exempt interest, the nontaxable portion of Social Security benefits, and excluded foreign earned income, summed across everyone in the tax family who files. Eligibility and the applicable percentage are measured against the federal poverty guidelines in effect at open enrollment. For 2027 coverage those are the 2026 guidelines published 2026-01-15: $15,960 for one person and $33,000 for four in the 48 contiguous states and DC. Four hundred percent is $63,840 for a single filer and $132,000 for a family of four.
For a Schedule C client the path from QuickBooks to that number has five steps, and each one is a place the estimate goes wrong. Start with net profit on the profit and loss report, on the same accounting basis the return uses, which for most sole proprietors is cash. Add back any owner health premiums coded to insurance expense, because they aren't a business deduction. Subtract half of self-employment tax, any SEP or solo 401(k) contribution, and the self-employed health insurance deduction, which is the premium the client actually pays after the advance credit. Then add everything outside the business: a spouse's wages, interest, dividends, tax-exempt interest, nontaxable Social Security. The result is the estimate.
The self-employed health insurance deduction and the credit depend on each other. A bigger credit means a smaller net premium, a smaller deduction, a higher MAGI, and a slightly smaller credit. IRS Publication 974 resolves this with an iterative calculation method. In practice the loop settles in three or four passes, and for a client between 300 and 400 percent of poverty the deduction ends up equal to the expected contribution, because the net premium paid is exactly that contribution. The monthly P&L review a client already does supplies the starting number. The bridge below turns it into the one the Marketplace needs.
| Bridge line | Where it comes from | Direction | Common error |
|---|---|---|---|
| QuickBooks net profit, cash basis, year to date | Profit and loss report run on the client's tax basis | Start | Running an accrual report for a cash-basis filer |
| Projected net profit for the remaining months | Open invoices with expected pay dates, recurring billings, planned expenses | Add | Counting an invoice as income when it is dated rather than when it is paid |
| Owner health premiums coded to expense | Insurance expense detail filtered to the owner's policy | Add back | Leaving them as a Schedule C deduction |
| One half of self-employment tax | 92.35 percent of net profit, times 15.3 percent, halved | Subtract | Skipping it, which overstates MAGI by about 7 percent of profit |
| Retirement contribution | SEP or solo 401(k) the client will actually fund | Subtract | Assuming a contribution the client's cash can't cover |
| Self-employed health insurance deduction | Benchmark premium less the credit, iterated per Publication 974 | Subtract | Deducting the gross premium while also taking the credit |
| Non-business income | Spouse W-2, 1099-INT, 1099-DIV, tax-exempt interest, Social Security | Add | Forgetting tax-exempt interest and nontaxable Social Security, which both count |
One client, worked from the October books
Dana Whitlock is a freelance landscape architect, single, age 52, filing Schedule C on the cash basis, with no employees and a Marketplace silver plan. The numbers are illustrative, including the benchmark premium, which varies by county and age. The method is not. Her CPA runs the bridge on October 31 so the application can be updated well before December 15.
Step one: the net profit the return will show
The QuickBooks profit and loss report, cash basis, January 1 through October 31, shows net profit of $54,000. Two open invoices totaling $9,500 are expected to pay in November, and recurring maintenance-contract billings add $6,000 across November and December. Planned expenses for the two months are $3,500. Projected net profit is $66,000. Along the way the CPA finds $2,400 of Dana's own premiums coded to insurance expense and reclassifies them to owner's draw, so the $66,000 already reflects that correction.
Step two: from net profit to MAGI
Half of self-employment tax on $66,000 is about $4,660. Dana plans a $5,000 SEP contribution. She has $400 of taxable interest and no tax-exempt interest. AGI before the health insurance deduction is therefore $66,000 less $4,660 less $5,000 plus $400, or $56,740. The second-lowest-cost silver plan in her county is $820 a month, $9,840 a year. Running the Publication 974 loop, MAGI settles at about $51,480, which is about 323 percent of $15,960. The 2027 applicable percentage in the 300 to 400 percent band is 10.22 percent, so her expected contribution is $5,261 a year. The credit is $9,840 less $5,261, or $4,579, which is $382 a month. Her health insurance deduction is $5,261, the net premium she pays, and $56,740 less $5,261 is $51,479, so the loop closes.
Step three: what a December payment does to it
In mid-December a customer pays a $14,000 design fee that Dana expected in January. On the cash basis that is 2027 income. Net profit becomes $80,000, half of self-employment tax rises to about $5,650, and MAGI settles at about $63,280, which is about 397 percent of poverty. The expected contribution is $6,467 and the credit falls to $3,373. If the Marketplace kept paying $382 a month on the October estimate, the year's advance credit exceeds the allowed credit by about $1,206. Before tax year 2026 a single filer at that income would have repaid a capped amount. For 2027 coverage she repays all of it on the return she files in 2028, on top of the income and self-employment tax on the extra $14,000.
Step four: the cliff a few hundred dollars away
After the December payment Dana is about $560 of MAGI from 400 percent. At exactly $63,840 her credit for the year is $9,840 less 10.22 percent of $63,840, or $3,316. At $63,841 it is zero, and the entire year's advance credit, whatever was paid, is repaid in full. A client in this range is the one the CPA calls in the first week of November, not the one whose application auto-renews. The same habit from the pre-file sales tax check applies here: every dollar between the books and the number on the government form has to have a name.
Accounting controls for the premium tax credit income estimate
Source data: the QuickBooks profit and loss report on the client's tax basis, January 1 through the run date, with the run date recorded; the owner's draw and insurance expense detail, filtered to the owner's policy; the open invoice list with the client's expected payment date on each; recurring billing schedules; the prior two years' Forms 1040 and 8962 for historical MAGI; the current Marketplace application showing the income figure on file; the 2026 poverty guidelines; the 2027 applicable percentage table from Rev. Proc. 2026-26; and the benchmark premium for the client's county and age from the Marketplace preview tool.
Calculation: a fixed sequence anyone can re-perform. Net profit plus projected remaining months plus reclassified owner premiums gives Schedule C profit. Multiply by 92.35 percent and then by 15.3 percent, halve it, and subtract. Subtract the retirement contribution, add non-business income and the tax-exempt and nontaxable items, and iterate the health insurance deduction per Publication 974 until MAGI stops moving. Divide by the poverty guideline for the family size, read the applicable percentage, multiply, and subtract from the annual benchmark premium. Net profit is a flow for the calendar year, and on the cash basis December 31 is a point-in-time cutoff: cash in the bank by that date is 2027 income regardless of invoice date. Polarity matters on one line in particular. The owner's premiums are a debit to owner's draw in equity, not a debit to expense, and coding them to expense understates net profit and the estimate by the premium amount.
Review: a second preparer re-performs the bridge from the same profit and loss report and gets the same MAGI within rounding; agrees the reclassified premiums to the insurer's billing statement; confirms every invoice counted in the remaining months has a written expected payment date from the client; compares the estimate to the prior two years' actual MAGI and asks for an explanation of any swing above 15 percent; confirms the figure entered on the Marketplace application equals the worksheet; and flags any client whose MAGI lands within 10 percent of 400 percent of poverty for a direct conversation before December 15.
Decision: the client decides how much of the credit to take in advance. A client near the cliff can take less than the full advance credit, or none, and claim the credit on the return, which turns a repayment risk into a refund. The CPA owns the worksheet and its date. The client owns reporting income changes to the Marketplace during the year, which the IRS says should be done promptly, and the engagement letter should say so. The firm decides whether this is a billed planning call or part of the compliance fee. It is advisory work with a deadline, and an advisory practice that prices it as such has the easier conversation in April.
Limits and common mistakes
Every dollar figure for Dana is illustrative. Benchmark premiums vary by county, age, and tobacco use, and state-based exchanges have their own deadlines and, in some states, their own subsidies. The 2027 applicable percentages are final in Rev. Proc. 2026-26, but the inflation-adjusted amounts for tax year 2027 and the regulations conforming the credit rules to the 2025 law are not, and KFF notes that litigation has paused or vacated several Marketplace rules for 2027. Treat the mechanics above as the structure and confirm each number against the client's own Marketplace preview and the sources linked.
The first mistake is estimating from gross receipts, or from net profit without the adjustments. Both overstate MAGI, which understates the advance credit. The client overpays premiums all year and gets the difference back only at filing.
The second is the reverse, and it is the expensive one: coding the owner's premiums to insurance expense, estimating from an understated profit, taking too much advance credit, and repaying the full excess with no cap.
The third is ignoring cash-basis timing in December. A payment that lands December 28 instead of January 2 is 2027 income, and if the application wasn't updated, every dollar of credit it displaces is repaid.
The fourth is assuming the old repayment caps still protect clients under 400 percent of poverty. They do not, beginning with tax year 2026, and a client who last reconciled under the capped rules will not expect the difference.
Frequently Asked Questions
What income goes into a premium tax credit income estimate for a self-employed client?
Modified adjusted gross income for the whole tax family: adjusted gross income from the return plus tax-exempt interest, the nontaxable portion of Social Security benefits, and excluded foreign earned income. For a Schedule C client that means net profit less half of self-employment tax, less retirement contributions, less the self-employed health insurance deduction, plus any income outside the business.
Are repayment caps on excess advance premium tax credit gone for 2027 coverage?
Yes. The IRS states that beginning with tax year 2026, taxpayers must repay the full amount of any excess advance payments of the premium tax credit. The former repayment limits for households under 400 percent of the poverty line no longer apply, so a 2027 estimate that is too low is repaid in full on the 2027 return.
Where should a sole proprietor's health insurance premiums be recorded in QuickBooks?
As owner's draw in equity, not as insurance expense. The premiums are not a Schedule C deduction. The deduction is taken on Schedule 1 through Form 7206, and when advance credit was paid it is limited to the premium actually paid after the credit. Coding premiums to expense understates net profit and therefore understates the income estimate.
What is the 2027 income cliff for a single self-employed client?
Four hundred percent of the 2026 federal poverty guideline, which is $63,840 for one person in the 48 contiguous states and DC. At or below that figure the expected contribution is capped at 10.22 percent of income under Rev. Proc. 2026-26. One dollar above it the credit is zero and all advance credit received for the year is repaid.
What should a client do if December income comes in above the estimate?
Report the change to the Marketplace promptly, as the IRS advises, so the remaining advance payments are reduced, and set aside the excess already received. On the cash basis, money received by December 31 is that year's income regardless of when it was invoiced, so the estimate should be revisited whenever a large payment moves across the year-end.
Once each client's bridge from net profit to modified AGI is written down, the same worksheet refreshes every month from the live profit and loss report, and the client near the cliff gets a call in time to act. FinBoard reads the QuickBooks Online ledger into one reporting view per client, so a firm can see year-to-date net profit, owner draws, and the December pipeline for every self-employed client on one screen. See how FinBoard puts every client's year-to-date P&L on one page before the December 15 deadline.
