I left my Corporate America job in April 2014 via an exit package after the company was sold. I have since gone full time into my CPA practice that I previously did part time. One question that has come up is that I’m covered under my prior employer Cobra plan until 2015. I’ve continued that coverage but instead of getting the employee subsidized rate, I pay the full rate just like I would otherwise do with a regular health insurer. My question is the deductibility of these premiums. I understand that one can’t deduct a subsidized health insurance premium and that the policy would otherwise need to be in the name of the business or in my name. However, given that I’m paying the full amount it would seem that I can deduct these premiums as I’m a regular Schedule C filer as my business is a single member LLC. Any insight appreciated.
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"The hardest thing in the world to understand is the income tax" - Albert Einstein -
COBRA premiums are deductible on Sche A, but not as SEHI on Form 1040 as the plan is still in the other employer's name. Since Medicare premiums have been allowed, I feel this is a discriminatory practice, but so far there has been no legislative or judicial ruling on this that I am aware of. -
Not correct, though if "can" was "should be able to" I would agree. Seems totally bogus that you can't. I agree with Burke though, not deductible as SEHI!Originally posted by bbrownatl View PostComment
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I would take it
You are the insured and paying 100%. To me this is what the law demands. If you were married and it was you spouse whose name the insurance was in, then I would not claim it.Comment
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So would I.Kram BergGold wrote: I would claim it.
The insurance is in your name in exactly the same way as Medicare is in each person's name ... as the named, covered insured.
Remember, for 2014 you can only include the premiums from April (or May) through December, since you were covered by your employer's plan before that.Roland Slugg
"I do what I can."Comment
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Well, also the policy being established or considered established under the business. That's the part where there is some disagreement regarding COBRA. If I'm fired and giving my prior employer money to continue the health insurance policy I had through them I don't see how it can be considered to be in my name. It is basically very similar to Medicare which is of course why Burke said he felt it was discriminatory since the IRS now allows Medicare for SEHI deduction. If you take the position that COBRA is established in the name of the insured and not the prior employer it would seem it does qualify.Originally posted by Kram BergGold View PostComment
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I did a little research via Google on this. All say it is not deductible as SEHI. One post actually said it was disallowed by the IRS on audit due to the "plan established under the business name" not being met. The insured is the individual; but the plan is still in the former employer's business name. I could not find an IRS source or cite on this that specifically mentioned COBRA. Remember they didn't allow Medicare initially, but it was changed.Last edited by Burke; 12-05-2014, 03:37 PM.Comment
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That's interesting, I Googled it and found a mixture of results.Originally posted by Burke View Post
I stick with the Medicare comparison, and if the taxpayer is paying the COBRA bill that is in HIS name, I think it's eligible for the SEHI deduction.Comment
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Deduct it
Everything I've heard seems to say:
1) Technically it doesn't qualify because it is not in your name, or established in the name of the business.
2) IRS auditors are ignoring the above conditions because it is virtually impossible for a self-employed proprietor
to find an insurance company to cover just one policyholder.
This is all hearsay on my part, but I have heard this in seminars, and in lieu of having insurance that really
qualifies under those impossible conditions, IRS is allowing COBRA, and even Medicare, as a SEHI and does not
force it into Sch A.Comment
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