Is the COBRA premium subsidy counted as income and taxable?
The premium subsidy is not taxed if the individual’s income falls under certain limits. There is a phase-out of eligibility for the subsidy, which may increase a high-income individuals’ tax liability if they receive the subsidy.
The phase-out affects you if whose modified adjusted gross income is over $125,000, or $250,000 for those filing jointly. Tax liability is increased, to achieve repayment of a portion of the subsidy, for those taxpayers whose modified adjusted gross income is between $125,000 and $145,000, or $250,000 and $290,000 for those filing joint returns.
If a single taxpayer’s modified adjusted gross income exceeds $145,000, or $290,000 for those filing joint returns, the full amount of the subsidy must be repaid as an additional tax. There is no additional tax for individuals with modified adjusted gross income less than these income levels.
It it much easier to get your own private health insurance, and buy it under a business name, then deduct the premiums from the business income. Always check with a tax professional about doing this and other tax matters.
Are COBRA premium payments tax deductible?
Health insurance payments are generally allowed as a medical deduction if you itemize your deductions and your total medical expenses, such as premiums, co-pays, deductibles, transportation and medication, exceed 7.5 percent of your adjusted gross income.
If you leave employee status and become self employed, don't look to deduct your COBRA payments as an adjustment to AGI. Instead, claim them as an itemized deduction.
Are regular health insurance premium payments tax deductible?
A self-employed individual is allowed to deduct health insurance coverage as an adjustment to adjusted gross income rather than as an itemized deduction subject to the AGI limitation. This means that a self-employed individual can benefit on his or her tax return from the payment of health insurance coverage without regard to itemizing deductions or exceeding the threshold.
To qualify to deduct health insurance coverage, the insurance plan must be established under your trade or business. Since the COBRA coverage was not established under your trade or business, the health insurance payments would appear not to qualify for this above-the-line deduction to arrive at AGI.
Craig Casey is an Writer, Coach, Blogger, Husband, and Former Health Insurance Agent helping people on the web since 1999 with their health insurance problems.
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