Self Employed Health Insurance Deduction and Cobra
There is no disputing that health insurance can be a night mare for the self-employed. This raises the issue of the self employed health insurance deduction and Cobra.
Self Employed Health Insurance Deduction and Cobra
Health insurance is one of the primary concerns for all self-employed business owners. When working as an employee for a company, health and dental insurances are usually provided to some extent by that company. However, many home business owners become concerned when leaving those companies to form their own businesses due to the loss of this health insurance. And if that wasn’t a major concern in itself, even employees for major businesses are losing health insurance. Numbers of uninsured workers have risen due to the expensive costs of health insurance.
Despite this, there is good news for those who leave a company to run their own. An act known as the Consolidated Omnibus Budget Reconciliation Act, or COBRA, was passed that allows departing workers to buy health insurance through their employer’s group plan. What this means is that those who are leaving a company can still buy insurance from their former employer. The benefits of this can be extensive for those looking to form their own companies but who are dismayed due to the potential loss of health insurance.
However, don’t think that COBRA will be cheap. Many who go through COBRA to obtain health insurance are extremely surprised with the rates they are being charged. Since employees for companies are used to having the rates deducted automatically from their paychecks, they don’t realize how high they can be once they are tabbed against them all at once. Such rates can range from $500 a month for families and $200 a month for individuals.
Unfortunately, the self employed health insurance deduction and COBRA do not mix. You can claim a deduction for your self employed health insurance deduction if the policy is held under your business or trade name. Health insurance through COBRA is considered to be held under your former employer’s name. This twist means you cannot claim COBRA payments as a deduction. Since it is difficult to get self employed health insurance, COBRA still makes sense in a lot of cases.