COBRA assistance for self-employed

[Zoltan2016]

I am self-employed and received cobra premium assistance during COVID.  Since the premium assistance is excluded from income for FIT purposes, I only deducted the premiums I actually paid.    E.g., if health insurance premiums are $100/mo, and I got 6 months of premium assistance, I reported $600 worth of deductions and not $1200.

Assuming that is correct, when I need to report the premium assistance as income in California, do I then get an offsetting deduction for that amount ($600 in the example above)?  If so, how do I adjust the health insurance payments made to reflect the full amount owed ($1200) just for california?

[JohnW152]

Yes, you’ll need to include the $600 exclusion from your federal return as income on your California return.

To do this, when you’re going through the California interview in TurboTax:

1. The initial health insurance questions, starting with Did you both have health insurance coverage in 2021?, won’t address the COBRA issue.  Answer those questions fully, then continue through the interview.
2. Eventually, you’ll come to the Here's the income that California handles differently screen.  
3. Scroll down to Medical, then select Start to the right of COBRA Premium Assistance.
4. On the Enter COBRA premium assistance subsidies excluded from federal income page, enter the amount excluded from your federal return, then select Continue.

Please see COBRA premium assistance in the 2021 Instructions for Schedule CA (540)California Adjustments for more information.

[Zoltan2016]

Thank you, @JohnW152 .  Are you suggesting that by doing that Turbotax will make the approrpriate adjustment to the deductible amount? It does not seem to be doing that.  Or are you suggesting that California does not offer a corresponding deduction?

[DaveF1006]

Yes, California does not conform with Federal Law and allow an exclusion for Cobra premiums. If you follow the advice given by johnW152, the premium assistance should be added back a income into your California return.

@Zoltan2016

[Zoltan2016]

@DaveF1006  Thank you.  I fully understand that California requires you to take the federally excluded amount into income and I know how to do that.  My question is: since California imputes income to me ($600 in my original example), can I deduct the full amount of the cost of cobra ($1200 in the example) instead of the amount I paid directly.   If so, is turbo tax programmed to do that if you tell it the amount excluded for FIT?  Or do you need to handle it in a different way?

[ZoltanB45]

No, because the additional $600 was not paid out. Only deduct paid on the federal side. However, if you had to pay it back say this year, you would deduct it on next year's return.