359 / What are the tax implications of any premium reductions under the COBRA temporary premium assistance rules?

The amount of any COBRA premium reduction taken under the special rules enacted in 2009 and 2010 (see Q 357 and Q 358) was excluded from an individual’s gross income.¹ If the premium reduction was provided with respect to any COBRA continuation coverage that covered an individual, the individual’s spouse, or the individual’s dependent, and the individual’s modified adjusted gross income, that is, the adjusted gross income plus amounts excluded under IRC Sections 911, 931, or 933, exceeded $145,000, or $290,000 for married couples filing jointly, then the amount of the premium reduction was recaptured as an increase in the individual’s federal income tax liability.² The recapture was phased in for individuals with a modified adjusted gross income in excess of $125,000, or $250,000 for married couples filing jointly.³ An individual was able to elect to permanently waive the right to the premium reduction, for example, to avoid receiving and then repaying the premium reduction.⁴

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1.     IRC § 139C, as added by ARRA 2009. See also Notice 2009-27, 2009-16 IRB 838, 839.

2.     See § 3001(b)(1), ARRA 2009. See also Notice 2009-27, 2009-16 IRB 838, 839.

3.     See § 3001(b)(2), ARRA 2009. See also Notice 2009-27, 2009-16 IRB 838, 839.