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Publication 502

COBRA Premium Assistance(p26)

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides that if you were covered under a group health plan and you would lose coverage because of a qualifying event, you should be allowed an opportunity to elect COBRA continuation health coverage under the plan. If there was no available election, your employer or the plan was subject to an excise tax. You can be required to pay the full premium for the COBRA continuation coverage.
If you are an assistance eligible individual, you pay 35% of the premium otherwise payable for this coverage and are treated as having paid the full premium. You are an assistance eligible individual if:
A qualified beneficiary is generally any individual who is covered under a group health plan on the day before the involuntary termination. This includes the covered employee, the employee’s spouse, and the employee’s dependent.
The premium assistance (the 65% reduction of the premium) applies to the first period of coverage beginning after February 16, 2009. The reduction applies until the earliest of:
  1. The first date the assistance eligible individual becomes eligible for other group health plan coverage or Medicare coverage,
  2. The date that is 15 months after the first day of the first month for which the reduced premium applies to the individual, or
  3. The date the individual ceases to be eligible for COBRA continuation coverage.
The premium assistance is not included in your gross income. However, if your modified adjusted gross income (AGI) is more than $125,000 ($250,000 if married filing jointly) but not more than $145,000 ($290,000 if married filing jointly), your income tax for the year is increased by a percentage of the premium assistance. Use Worksheet F to figure the amount you must include as tax on your return. If your modified AGI is more than $145,000 ($290,000 if married filing jointly), your income tax for the tax year is increased by the total premium assistance. Include the increase in your income tax on Form 1040, line 60, or Form 1040NR, line 59. On the dotted line next to that line, enter the amount of the tax and identify it as "COBRA."taxmap/pubs/p502-012.htm#en_us_publink1000205029

Worksheet F. Recapture of COBRA Premium Assistance for Higher Income Taxpayers

Instructions: Use the following worksheet to figure the taxable portion of your COBRA premium if your modified AGI (line 3 below) is more than $125,000 ($250,000 if married filing jointly) but less than $145,000 ($290,000 if married filing jointly).
1.Enter your AGI (Form 1040, line 38 or Form 1040NR, line 36)1.
2.Enter the total of any amounts from Form 2555, lines 45 and 50; Form 2555-EZ, line 18; and Form 4563, line 15, and any exclusion of income from American Samoa and Puerto Rico 2.
3.Modified AGI. Add lines 1 and 23.
4.Enter $125,000 ($250,000 if married filing jointly)4.
5.Subtract line 4 from line 35.
6.Enter $20,000 ($40,000 if married filing jointly)6.
7.Divide line 5 by line 6. Enter the result as a decimal (rounded to at least 3 places)7..    
8.Enter the amount of the COBRA premium assistance* you received in 20128.
9.Multiply line 8 by line 7. Enter result here and include it on Form 1040, line 60 or Form 1040NR, line 59. On the dotted line next to that line, enter the amount shown on line 9 and identify it as "COBRA." 9.
*Contact your former employer or health insurance plan to obtain the total premium assistance, if unknown.
You may elect to permanently waive the right to the premium assistance. You will not receive the premium assistance and you will not have to include the assistance in your income tax if your modified AGI is more than $125,000 ($250,000 if married filing jointly). To make this election, give a signed and dated notification (include a reference to "permanent waiver") to the person to whom premiums are payable.
You will not qualify for the health coverage tax credit (discussed next) for any month for which you receive premium assistance.
For more information see Notice 2009-27, available at