Are COBRA Payments Tax Deductible?

COBRA payments, which allow individuals to continue their employer-sponsored health insurance after losing a job, can be tax-deductible under certain circumstances. These premiums qualify as medical expenses and can be deducted on your federal income tax return if you itemize deductions and your total unreimbursed medical expenses exceed 7.5% of your adjusted gross income (AGI). However, COBRA payments are not eligible for the self-employed health insurance deduction because they are tied to a group plan rather than an individual or business-sponsored plan. Understanding these nuances can help you determine if you qualify for this deduction.

When Are COBRA Payments Deductible?

COBRA premiums are considered medical expenses under IRS rules, and you can deduct them if:

• You itemize deductions on Schedule A of your tax return.
• Your total unreimbursed medical expenses (including COBRA premiums) exceed 7.5% of your AGI.

For example, if your AGI is $50,000, only the portion of your medical expenses exceeding $3,750 (7.5% of $50,000) is deductible.

Who Cannot Deduct COBRA Payments?

• Self-Employed Individuals: COBRA premiums do not qualify for the self-employed health insurance deduction because they are tied to a group plan under federal law rather than an individual or business-sponsored plan.
• Standard Deduction Filers: If you take the standard deduction instead of itemizing, you cannot claim COBRA premiums as a deduction.

Additional Considerations

1. State Tax Rules: Some states may have different rules regarding the deductibility of COBRA premiums, so check with your state tax authority.
2. Subsidized Premiums: If your COBRA premiums are subsidized (e.g., through an employer or government program), only the portion you paid out-of-pocket is deductible.
3. Record Keeping: Keep detailed records of all COBRA payments and other medical expenses to ensure accurate reporting on your tax return.

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