DEDUCTIBILITY OF COBRA

[AnnieR]

Client is a diemaker who was laid off from a Chrysler plant, got a job in another (not Chrysler) plant in MI. He was told at the time that he would be working as an independent contractor for 6 months, after which he would be hired as a full-time employee. The company hired him after 6 months, then let him go after a month as a w-2 employee. He had picked up his insurance from his previous full-time job with COBRA. Is the COBRA deductible from his 1099 MISC income (Non-employee comp)?

Thank you

AnnieR

[jasdlm]

Wouldn't the amount that he paid while he was actually self-employed go on the front of the 1040?

[Cat in OH]

My thought is that the contractor income is Sch. C with whatever regular expenses he had deducted there. The medical for that time frame is deducted on Sch. SE to reduce the amount on which he pays social security tax. The same amount is also deducted on the lower front of the 1040 to reduce his AGI.

[jainen]

>>insurance from his previous full-time job<<

This policy is an employer group plan, not established under his own business so therefore not eligible for an above-the-line deduction. Instead, I would look VERY closely at treating the 1099-MISC income as wages by filing Forms 8919 and SS-8.