COBRA payments are tax deductible as a medical expense, but whether that deduction actually saves you money depends on how you file. If you’re a W-2 employee, you’ll need to itemize on Schedule A, and only the portion of your total medical costs above 7.5% of your adjusted gross income counts. If you’re self-employed with net business income, you can deduct COBRA premiums directly from your income without itemizing and without any percentage floor.
The 7.5% AGI Rule for Most Filers
COBRA premiums qualify as medical expenses under Section 213 of the Internal Revenue Code, which lets you deduct unreimbursed medical and dental costs that exceed 7.5% of your adjusted gross income (AGI).1Office of the Law Revision Counsel. 26 U.S. Code 213 – Medical, Dental, Etc., Expenses The IRS specifically includes health insurance premiums you pay out of pocket, and continuation coverage like COBRA falls squarely inside that category.2Internal Revenue Service. Publication 502, Medical and Dental Expenses
The floor is where most people lose ground. On a $60,000 AGI, the first $4,500 of medical spending produces zero tax benefit. Only what’s above that line counts. Pay $8,000 total in COBRA and other medical bills, and you deduct $3,500. Pay $4,000, and you deduct nothing.
COBRA is expensive enough that it often pushes people over the threshold on its own. Coverage typically runs $600 to $700 per month for an individual and considerably more for family coverage, because you’re paying the full premium your employer used to subsidize, plus a 2% administrative fee.3U.S. Department of Labor. COBRA Continuation Coverage Twelve months of individual coverage can easily reach $7,200 to $8,400.
Will Itemizing Actually Help You
Clearing the 7.5% floor is only half the fight. You also need your total itemized deductions to beat the standard deduction. For tax year 2026, the standard deduction is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household.4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
Those are high walls. A married couple needs combined itemized deductions above $32,200 before itemizing produces a single dollar of benefit. And remember, only the medical costs above 7.5% of AGI feed into that total. At a $70,000 AGI, the first $5,250 in medical bills doesn’t help; only what’s left of your COBRA payments and other medical spending goes to work.
Single filers with heavy COBRA costs and other deductions like mortgage interest and state taxes can often make the numbers work. Married couples with moderate incomes and few other itemized deductions usually come out ahead taking the standard deduction.
The Self-Employed Route
If you’re self-employed, the deduction works very differently. Section 162(l) of the Internal Revenue Code creates an above-the-line deduction for health insurance premiums, COBRA included, paid by self-employed individuals.5Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses Above the line means the deduction reduces your AGI directly. No itemizing. No 7.5% floor. Every dollar of premium comes off your income.
Two limits apply. First, the deduction can’t exceed your net self-employment income, so it won’t create or enlarge a business loss.5Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses If your COBRA premiums totaled $9,000 but you netted only $6,000 from self-employment, you deduct $6,000 above the line. The remaining $3,000 can still go on Schedule A with your other medical expenses.6Internal Revenue Service. Instructions for Form 7206
Second, you can’t take the deduction for any month you were eligible to participate in a subsidized health plan through any employer, including a spouse’s employer. Eligibility alone kills it for that month, even if you didn’t enroll.6Internal Revenue Service. Instructions for Form 7206 The determination is month by month, so track when other coverage was available.
S-Corporation Owners
Owning more than 2% of an S corporation adds a step. The S corporation must either pay the COBRA premiums directly or reimburse you, and the amount has to appear as wages in Box 1 of your W-2.7Internal Revenue Service. S Corporation Compensation and Medical Insurance Issues Those amounts aren’t subject to Social Security or Medicare tax. Once the premium is on your W-2, you claim the self-employed health insurance deduction to offset it. Skip the W-2 reporting and you lose the above-the-line deduction entirely.
Payments You Can’t Deduct
Not every dollar spent on COBRA counts. If a former employer covers part of your premium under a severance arrangement, that portion is not yours to deduct. Only what you paid personally with after-tax dollars qualifies.
Health savings account (HSA) funds can legitimately pay COBRA premiums; continuation coverage is one of the specific exceptions to the rule that HSAs generally can’t pay insurance premiums.8Internal Revenue Service. Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans But any premium paid with tax-free HSA distributions can’t also be claimed as a medical deduction. The same dollars can’t be used twice. Health care flexible spending accounts generally can’t reimburse insurance premiums at all, including COBRA. And any premium paid through pre-tax payroll deductions is off the table for deduction, because the money was never taxed to begin with.
Premiums Paid for Family Members
COBRA premiums you pay for your spouse or dependents count toward your medical expense deduction alongside your own. Publication 502 also extends this to certain relatives who don’t qualify as your dependents. If you’re paying COBRA for someone who meets the IRS relationship and support tests but earned too much to be claimed, you can still include those premiums.2Internal Revenue Service. Publication 502, Medical and Dental Expenses
The relationship test covers children, parents, siblings, in-laws, and anyone who lived with you all year as a household member. You also need to have provided more than half of that person’s support during the year. This is where picking up COBRA premiums for an adult child or aging parent can become deductible on your return.
Where COBRA Premiums Go on Your Return
For the itemized route, total medical and dental expenses go on line 1 of Schedule A (Form 1040): COBRA premiums, copays, prescriptions, and every other unreimbursed cost.9Internal Revenue Service. About Schedule A (Form 1040), Itemized Deductions The form walks you through applying the 7.5% floor. If your itemized total beats the standard deduction, you transfer it to Form 1040. Software handles the comparison, but check it manually to confirm the better option was chosen.
Self-employed filers use Form 7206 to calculate the deduction, then enter the result on Schedule 1, Part II. That reduces AGI directly, which can also help with income-tested items like student loan interest phase-outs and IRA contribution limits. Any COBRA premiums that exceed the earned income cap can go on Schedule A with your other medical expenses.
Timing and Records
Medical expenses are deductible in the year you pay them, not the year of care. Mail a check for your December COBRA premium on December 30, and it counts for the current tax year even if the check clears in January.2Internal Revenue Service. Publication 502, Medical and Dental Expenses The mailing date controls.
The same rule applies to retroactive elections. You have 60 days after receiving your election notice to decide whether to continue coverage, and payments covering the retroactive period are deductible in the year you actually pay them.10DOL.gov. FAQs on COBRA Continuation Health Coverage for Workers Elect COBRA in February and pay three months of back premiums at once, and all three months are deductible in the year the check is written. Bunching payments can push you over the 7.5% floor in a year you’d otherwise fall short.
Keep the paper trail. Save the COBRA election notice from your former employer or plan administrator, monthly billing statements, and proof of each payment through bank statements, canceled checks, or credit card records. Don’t overlook the 2% administrative fee; it’s part of the deductible premium.10DOL.gov. FAQs on COBRA Continuation Health Coverage for Workers Dental or vision premiums included in your COBRA election count too. The IRS generally has three years from the filing date to question a return, so hold records at least that long.11Internal Revenue Service. Topic No. 305, Recordkeeping
Consider the Marketplace Before You Elect
Before running the deduction math, look at whether an ACA marketplace plan would cost less than COBRA outright. Losing job-based coverage triggers a special enrollment period on HealthCare.gov, so you can enroll in a marketplace plan instead of electing COBRA.12HealthCare.gov. If You Lose Job-Based Health Insurance Being offered COBRA does not disqualify you from the Premium Tax Credit. If your income qualifies, you can decline COBRA, choose a marketplace plan, and receive monthly subsidies that cut your premium at the source. For many people leaving a job, this beats COBRA on cash flow before any deduction enters the picture.
You can’t stack both benefits. Premiums covered by the Premium Tax Credit can’t also be deducted as a medical expense.2Internal Revenue Service. Publication 502, Medical and Dental Expenses And running COBRA and a subsidized marketplace plan at the same time can force you to repay advance credits for the overlapping months.13Internal Revenue Service. Premium Assistance for COBRA Benefits Notice 2021-31 Pick one path.