Cobra question and 401k question

[vetgirl]

Hello, I recently started my own LLC as a veterinarian and most clinics will pay me as an independent contractor/1099 for my various shifts. I have one hospital that does subtract tax so I'm paid as W-2. Am I still able to open a solo 401k if this is not something they provide?

Also, I am no longer receiving benefits after leaving my previous job and I plan to take advantage of Cobra for my health and dental insurance. Can I write off these payments and deduct them for my LLC?

Thank you!

[Christina71]

It's great that you're thinking about these important financial and tax implications as you start your LLC!

• Yes, you can open a Solo 401(k) even if you have W-2 income from one hospital.
• The W-2 income doesn't prevent you from having a Solo 401(k) for your self-employment income. You just need to ensure your contributions from all sources (W-2 401k and Solo 401k) stay within the IRS limits.  Here are more details for that from the IRS:  401(k) limit increases to $23,500 for 2025
• As for the Cobra, that can not be deducted for the business but it can be used for Itemized deductions. 
• The rules from the IRS state, the insurance plan must be established, or considered to be established, as discussed in the following bullets, under your business.
• For self-employed individuals filing a Schedule C (Form 1040) or Schedule F (Form 1040), a policy can be either in the name of the business or in the name of the individual.

Have a great day, Christina, EA 18+Years

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[DRich5]

@vetgirl  - Your COBRA payments may be deductible as a self-employed individual "above the line" as long as you meet the IRS requirements.  You must of earned self-employerd income for your business, you were not eligible for other coverage if you or your spouse are eligible for a subsidized plan and the premiums were paid out of pocket. 

While COBRA is a great option to fill the gap for your health insurance, many times the Affordable Care Act (ACA) is less expensive and is based on income which if you are starting out may make the coverage more affordable.  Losing job-based covereage, including COBRA, triggers a Special Enrollment Perion to enroll in an ACA  plan within 60 days.