If you've been through a tough life event -- such as job loss or divorce -- and lost your employer-sponsored health insurance, you might pay for COBRA coverage until you can find new health care. Named for the federal Consolidated Omnibus Budget Reconciliation Act of 1986, COBRA allows those eligible to continue purchasing health insurance at group rates. Depending on your adjusted gross income, your COBRA payments might be tax-deductible.
The Internal Revenue Service does allow you to deduct your COBRA premiums as part of your medical expenses, but there's an important caveat. You can deduct medical expenses only to the extent they exceed 10 percent of your adjusted gross income. You are still absorbing the cost for that 10 percent. Still, COBRA premiums usually aren't cheap, and if your income isn't particularly high, those costs and other allowable medical expenses could hit the 10 percent threshold.
Other Medical Expenses
If your COBRA premiums don't add up to at least 10 percent of your adjusted gross income, but other medical expenses might put you over the top, find out what the IRS does and doesn't allow for deductible medical expenses. Doctor and dentist visits, hospital treatment, addiction rehabilitation, and the transportation to get there, are among the expenses you can deduct. You can't include any cosmetic procedures or products used primarily for cosmetic purposes, health club dues, vitamins or nutritional supplements or over the counter medications. Unless a doctor prescribed a weight-loss program specifically for health reasons, such expenses aren't deductible.
While you can deduct your medical expenses that exceed 10 percent of your adjusted gross income, you must also itemize your deductions to receive the benefit. For 2013, the standard deduction for an individual taxpayer is $6,100, while for a married couple filing jointly the amount is $12,200. If the total of your deductible expenses -- including mortgage interest or state and local taxes, along with medical costs -- is less than the standard deduction, you're better off not itemizing.
In most cases, the beneficiary bears the responsibility for paying all of the COBRA premium payments. However, there could be instances in which an employer pays part of the premium, or an ex-spouse might agree to pay part of a COBRA payment as part of a divorce agreement. Only the COBRA premium you pay yourself counts as potentially deductible.
- IRS.gov: Publication 502 - Main Content
- Indiana University: HRA Account -- Health Expenses
- United States Department of Labor: FAQs about COBRA Continuation Health Coverage
- J.K. Lasser: COBRA Coverage
- IRS.gov: Standard Deduction
- U.S. News and World Report: 6 Critical Changes to Note When Filing Your 2013 Taxes
- Thinkstock Images/Stockbyte/Getty Images