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Wendy Reed
Wendy Reed, Enrolled Agent
Category: Tax
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Experience:  15+ years tax preparation and tax advice.
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Are Cobra Insurance Payments Tax Deductible

Resolved Question:

I switch jobs halfway thru the year. I was not eligible for health insurance with my new employer until after a 3 month probationary period. During that 3 month period, I paid for Cobra out of pocket. Can I claim that on my taxes as an itemized deduction?
Submitted: 7 years ago.
Category: Tax
Expert:  Wendy Reed replied 7 years ago.

Yes, absolutely.

Insurance premiums paid out of pocket for medical and dental (which are very expensive) are deductible. However, all of your yearly medical and dental expenses must total more than 7.5% of your adjusted gross income in order to benefit you.

Customer: replied 7 years ago.
So I can claim my cobra payments if my total annual amount of medical expenses (including Cobra) exceed 7.5% of my annual income? I just can't claim that amount separately? It doesn't seem fair since the partial premiums I pay now thru my paycheck are tax deductible?
Expert:  Wendy Reed replied 7 years ago.

The premiums you pay through your paycheck are not deducted on your return, but they are considered "pre-tax" deductions from your paycheck, which is a good thing! Unfortunately you don't have this option with Cobra, since while you are paying it you are not participating in an employer's pre-tax plan.

I agree that the 7.5% limitation is unfair, but, that is the rule for deduction of medical/dental expenses on your return. There is no where on the return to claim medical expenses separately, with the exception of those who are self-employed and pay their own medical premiums. However, since you were between employers, you cannot use this exception.

Wendy Reed, Enrolled Agent
Category: Tax
Satisfied Customers: 3345
Experience: 15+ years tax preparation and tax advice.
Wendy Reed and 3 other Tax Specialists are ready to help you
Expert:  Wendy Reed replied 7 years ago.

The premiums you pay through your paycheck are not deductible on your return, because they are paid with "pre-tax" funds---but you are right, in effect they are tax deductible. Unfortunately, you don't have this option to pay your Cobra benefits with this method.

I agree that the 7.5% limitation is unfair, but that is the rule for medical expense deduction. There is no where else on the return to deduct medical expenses, with the exception of self-employed individuals. This exception does not apply to you because you were between employers.

I would total your Cobra, vision, dental, copays, prescriptions, etc. (even medical mileage is deductibele) in order to get the maximum benefit from your medical deduction.

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