Question

How do I deduct FSA payments I made as part of COBRA? FSA payments are generally tax deductible. My W2's taxed income deducts only those FSA payments made via payroll.

Forum|Forum|6 years ago
June 1, 2019
3 replies
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I retired in July 2016. I had a FSA with my employer. Contributions to FSA are tax deductible. Thru payroll, $1350 was contributed to my FSA. My taxable income reported on my W2 reflects that $1350.

However, I continued my medical and FSA thru COBRA. I made an additional $1250 contribution to my FSA via the COBRA administrator, who I paid directly. My employer has no insight into these payments, and cannot therefore reduce my taxable income reported on the W2 by the $1250.

How can I reflect in my tax return a reduction in taxable income for these FSA contributions which did not "flow thru" my previous employer?

TurboTax Premier Online

D

dmertz

"I made an additional $1250 contribution to my FSA via the COBRA administrator, who I paid directly."

Is that permitted? I don't think that it is.

T

tlaritzAuthor

Yes it is permitted; I'd argue that the entire point of COBRA is to allow for uninterrupted coverage of medical-related benefits, including FSA. I have the receipts from both the COBRA and FSA administrators supporting that the FSA contributions, which I paid to the COBRA administrator, were credited to my FSA account.

O

Opus 17

The information I read indicated that the FSA deposits are included as part of your COBRA insurance premium. In that case, since you are paying the premiums from after-tax dollars, the entire insurance premium is an eligible expense to deduct as a medical expense (subject to the 10% rule of course.)

The net effect is that you are taking a tax deduction for after tax dollars being put into the account where they mingle with the other pre-tax dollars, in the end, all the money in the FSA ends up be pre- or un-taxed. Then any costs that are reimbursed from the FSA are not eligible medical deductions because they are already paid with tax-free dollars.

If you end up not actually being able to deduct your COBRA insurance premiums paid with after tax dollars because of the 10% rule or because you don't itemize deductions this year, there's no other way to get the money into the FSA tax-free.