Can I deduct my wife's COBRA premiums as part of self employed health insurance deduction?

Yes, you can typically deduct health insurance premiums for yourself, your spouse, and dependents as part of the self-employed health insurance deduction. The fact that your wife's coverage is through COBRA doesn't change this - what matters is that you're paying the premiums and you're self-employed. A couple important points though: First, make sure your S-corp is handling this correctly. For S-corp owners, the corporation should either pay these premiums directly or reimburse you, and include the amounts on your W-2 as wages. Then you can claim the deduction on your personal tax return. Second, the deduction is limited to your net earnings from self-employment. If your business has low or negative income in a given year, that would limit how much you can deduct.

I went through something similar last year and found an amazing tool that helped me sort through all the self-employed health insurance deduction rules. I used https://taxr.ai and it saved me hours of stress trying to understand if I could deduct both my premiums and my husband's. The software analyzed my specific situation (also S-corp owner) and confirmed I could take the full deduction for family premiums, even though they were from different sources. It also highlighted that I needed to have my business reimburse me for the premiums so they'd be included on my W-2, which I hadn't been doing correctly. Seriously made tax season so much less stressful!

Just wanted to follow up - I ended up trying taxr.ai after posting my skeptical comment. I'm actually impressed! The system identified that I had been missing out on about $4,200 in health insurance deductions because I didn't understand how to properly document premiums paid for my spouse through my self-employment. It also flagged that I needed to have my business reimburse me and include the amount on my W-2, which none of the other tax services ever mentioned. I was able to fix this for this year's taxes and will be amending last year's return too. I'm usually the last person to recommend services online, but this one genuinely helped me understand the self-employed health insurance rules.

If you've been having trouble reaching the IRS to get a definitive answer on your self-employed health insurance question, try https://claimyr.com - I was stuck on hold for hours trying to get clarity on a similar issue with my spouse's health insurance premiums. Claimyr got me connected to an IRS agent in under 15 minutes when I'd previously wasted entire afternoons waiting. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. Basically they navigate the IRS phone tree for you and call you back when they've got an agent on the line. I was able to confirm directly with the IRS that I could include my spouse's separate policy premiums in my self-employed health insurance deduction, which gave me peace of mind.

I need to eat some crow here. After posting my skeptical comment, I decided to try Claimyr since I was desperate to resolve a question about my self-employed health insurance deduction that my accountant couldn't answer clearly. I got connected to an IRS representative in about 20 minutes when I had previously given up after 90+ minutes on hold. The agent confirmed that I could include both my health insurance and my wife's separate policy in my self-employed deduction as long as I'm paying them both. She also walked me through the proper documentation needed for an S-corp. Honestly, it was worth it just to get a definitive answer from the actual IRS instead of conflicting opinions online. Saved me from potentially making a mistake that could have triggered an audit.

One thing nobody has mentioned yet - make sure your S-corporation has a formal medical reimbursement plan in place. This is required for properly handling health insurance for shareholders who own more than 2% of an S-corp (which I assume you do). Without a written plan, you could potentially lose the deduction if audited. Also, the timing matters - if you establish a proper plan now, you can only reimburse expenses going forward, not retroactively from earlier in the year. Talk to your accountant about setting up a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) or an Individual Coverage Health Reimbursement Arrangement (ICHRA).

Has anyone actually calculated how much this deduction saves? I'm also self-employed with an S-corp and pay about $12,000 annually for health insurance for myself and spouse, but I'm trying to figure out if the tax savings justify the hassle and additional accountant fees to set everything up correctly.

Just wanted to add another perspective on this - I'm also an S-corp owner and went through this exact situation last year. One thing that helped me was keeping detailed records of all premium payments, including bank statements showing the payments came from personal funds initially. When I had my S-corp reimburse me for the health insurance premiums (both mine and my spouse's), I made sure to document everything with formal reimbursement requests and board resolutions. This created a clear paper trail that my accountant said would be valuable if ever audited. The key insight I learned is that the IRS doesn't care whether the original coverage was through COBRA, marketplace plans, or employer plans - what matters is that you're paying for health insurance for yourself and eligible family members as a self-employed person. The source of the coverage is irrelevant for deduction purposes. Also, don't forget that this deduction reduces your AGI, which can have additional benefits like potentially qualifying you for other income-based tax credits or deductions. It's not just the direct tax savings on the premiums themselves.

This is a great question and the previous responses have covered the key points well. As someone who's been through S-corp health insurance deductions for several years, I wanted to emphasize a few practical tips: First, definitely get that formal reimbursement process set up ASAP. Have your S-corp either pay the premiums directly or reimburse you monthly rather than waiting until year-end. This creates better documentation and cash flow. Second, regarding your wife's COBRA premiums - yes, these absolutely qualify as long as you're paying them. The IRS doesn't distinguish between different types of health coverage for the self-employed health insurance deduction. COBRA, marketplace plans, or direct insurance all work the same way. One thing I learned the hard way: make sure your S-corp has enough payroll to support adding $16,300 to your W-2. Since you mentioned having an employee, you're probably already running payroll regularly, but this is something to coordinate with your payroll processor. Also, consider timing - if you're setting this up mid-year, you might want to have the S-corp reimburse you for premiums paid earlier in the year (with proper documentation) rather than losing those deductions entirely. The tax savings on $16,300 in premiums will be substantial - likely $3,500-$4,500 depending on your tax bracket. Definitely worth getting this structured correctly!

This thread has been incredibly informative! I'm in a similar situation with my LLC (taxed as S-corp) where I've been paying health insurance premiums for both myself and my husband, but I haven't been structuring it properly for maximum tax benefit. One question I haven't seen addressed - does the business need to have a separate business bank account to pay these premiums, or can the S-corp reimburse personal payments and still qualify? I've been paying everything from our personal checking account and I'm wondering if that creates any complications for the deduction. Also, for those who mentioned the formal written plan requirement - is this something most accountants can draft quickly, or should I expect this to be a significant expense? I'm trying to weigh the setup costs against the potential tax savings. The math on the potential savings is compelling. With about $14,000 in combined premiums annually, even a conservative estimate of 25% tax savings would be $3,500 - definitely worth the effort to get this structured correctly!

This conversation has been really eye-opening! I'm also an S-corp owner and had no idea about the formal reimbursement process requirement. I've been taking the self-employed health insurance deduction for years, but my accountant never mentioned needing to have the S-corp reimburse me or add it to my W-2. I pay about $11,000 annually for health insurance premiums for my family through a marketplace plan. Based on the math everyone's been sharing, I could potentially be missing out on significant tax savings by not structuring this correctly. Quick question - if I've been taking the deduction incorrectly for the past few years (just deducting the premiums I paid personally without the S-corp reimbursement process), could this create problems if I get audited? Should I consider amending previous returns once I get the proper structure in place, or just make sure I do it correctly going forward? The potential tax savings definitely justify getting this set up properly. Going to reach out to my accountant this week to discuss establishing the formal plan and reimbursement process. Thanks to everyone who shared their experiences - this has been incredibly helpful!

Great discussion everyone! As someone who went through this exact situation a couple years ago, I wanted to share a few practical insights that might help. First, regarding the audit concern - I was actually selected for an IRS audit in 2022 and the self-employed health insurance deduction was one of the items they reviewed. Having the proper S-corp reimbursement documentation and formal plan in place made all the difference. The auditor barely spent 10 minutes on it because everything was clearly documented. For timing of reimbursements, I do mine quarterly which seems to work well - it's not too administratively burdensome but creates a good paper trail. You definitely don't want to wait until year-end because it can create cash flow issues and looks less legitimate. One thing I haven't seen mentioned - make sure your health insurance premiums don't exceed your net earnings from self-employment for the year. This is the main limitation on the deduction. With $130k in business income mentioned in the original post, this shouldn't be an issue, but it's worth keeping in mind. Also, double-check that you're not eligible for coverage through your wife's employer (even if she doesn't currently have benefits). If she could potentially get coverage through her teaching position, that might affect your eligibility for the full deduction. The tax savings are absolutely worth the setup effort - I save about $4,200 annually on similar premium amounts. Just make sure everything is properly documented!

This has been such a comprehensive discussion! I'm also an S-corp owner dealing with health insurance deductions, and I wanted to add one point that might be helpful for others in similar situations. Regarding the concern about your wife's employer not offering health benefits - since her school district doesn't provide coverage options, this shouldn't create any eligibility issues for your self-employed health insurance deduction. The IRS limitation only applies when affordable employer coverage is actually available, not when an employer simply exists without offering benefits. I've been through a similar setup process with my accountant, and one thing that streamlined everything was creating a simple spreadsheet tracking all premium payments throughout the year. This made the quarterly reimbursement requests much easier to process and gave us bulletproof documentation for tax purposes. Also, don't forget that once you have the proper S-corp reimbursement structure in place, you might want to explore other health-related benefits like HSA contributions if you switch to a high-deductible health plan in the future. The formal reimbursement plan can often be expanded to cover additional health benefits. The consensus seems clear - with $16,300 in combined premiums and your profitable business, you're looking at substantial tax savings that will far exceed any setup costs. Getting this structured properly before year-end should be a priority!

Excellent question about quarterly estimated taxes! When you set up the S-corp health insurance reimbursement system, you're essentially creating a tax-neutral transaction - the reimbursements increase your W-2 wages (subject to income tax) but you get an offsetting deduction on your personal return. However, there's a timing consideration for estimated taxes. Your quarterly withholdings will increase slightly because the health insurance reimbursements are subject to income tax withholding through payroll, but you won't get the benefit of the offsetting deduction until you file your annual return. In practice, this usually doesn't require major adjustments to your estimated payments because the net tax effect is minimal - you're mainly shifting the timing of when you get the tax benefit. The bigger advantage is the AGI reduction, which can help with other income-based limitations and phase-outs. If you're converting from sole proprietorship to S-corp, definitely factor in the health insurance benefits when doing your cost-benefit analysis. Between the potential FICA tax savings on business profits and the improved health insurance deduction structure, it can be quite compelling for profitable businesses. Just make sure to work with an experienced CPA who understands S-corp compliance requirements!