I received COBRA premium assistance subsidy from June to September in 2021 for my Cobra premium. Should I report it as income? and how? I didn’t receive any tax form…

[MaryK4 · Accepted solution]

No you do not have to report the COBRA assistance as income.  Under Sec. 139I, the premium assistance is excluded from an individual’s gross income because the employer or other payer can receive a tax credit for providing the coverage.

[mmike0]

 MaryK1101, thanks for the information!  So, looks it will not be needed to report in federal return. 

How about state like California? I am seeing, in turbo tax, California return is asking me to type in the subsidies excluded in federal return...

[MaryK4 · Accepted solution]

No, unfortunately.  The ARPA allows an exclusion from gross income for COBRA premium assistance subsidies received by eligible individuals for the COBRA coverage period beginning on April 1, 2021, and ending on September 30, 2021. California law does not conform to this federal provision. You must add it back on Sch CA. @mmike0

[mmike0]

I see. I will find out the Cobra premier in 2021 to fill in California return.

Thanks for the information.

[ExcessTurbo]

I don't understand.  Specifically related to California Schedule CA(540) Part I, Section B, line 8z.

Thanks to the American Rescue Plan Act, the federal government gave a tax credit to my former employer to cover my payments starting April 1, 2021.  Hence, I did not have to make payments for COBRA to my former employer for a few months.  I received no tax statements with regards to this issue.  My former employer did not pay for my COBRA.

Is California trying to tax this federal benefit?

Am I suppose to enter the value of the payments that the federal government paid for me into CA(540) Part I, Section B, line 8z.

I did not deduct COBRA payments that I did make on my federal return.

[JohnW152]

Yes, that’s correct, you need to include this as income on your state return. 

California law doesn’t conform to the federal exclusion, and the amount excluded from your federal return must be included on line 8z, column C of your 2021 Schedule CA (540) California Adjustments - Residents. 

According to Frequently Asked Questions - COBRA/Cal-COBRA Premium Assistance:

To receive the subsidy, you must let your employer, plan administrator, or health plan know that you want to elect to receive the subsidy. 

You will not receive a direct payment for the premium assistance. Instead, if you are eligible for premium assistance, the premium assistance will be provided to your employer or health plan to pay the premiums during coverage period (during the period you are eligible between April 1, 2021 and September 30, 2021).

So, although you didn’t receive a direct payment for the assistance, you are treated as receiving the subsidy, which isn’t excluded from your California income.

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

@ExcessTurbo

[patelshyam2002]

I have lived in Missouri from Jan 2021 to September in 2021 and received the ARPA assited Cobra coverage from April thru September. I have not received any money (subsidy) directly deposited into my bank account. But my employer has got that money from the government. From Oct 1st, I moved to California and started new job from Oct 4th. Do, I need to consider the Arpa premium as income for California income tax. Note that I didn't received this assistance while in CA. From Oct' 1st I was on employer health coverage and aslo I was only 3 month resident of CA in 2021 and still lives in California?

Thanks

PP

[TurTx2000]

I am in almost the exact same situation as patelshyam2002. I was a resident of Pennsylvania from January 2021 through September 2021. I then physically relocated  to California for a job in October 2021 and was a resident there through the end of the year. When I was in PA I received the COBRA premium assistance subsidy for 4 months. All of the COBRA subsidies I received were received while I was a PA resident.

Please note that I am not a tax professional and am new to CA as well, but looked into this a bit and the solution appears to be the following. As part-year residents, we are required to fill out the "California Adjustments - Nonresidents and Part-Year Residents" part of  California Schedule CA (540NR), which has separate columns (columns A-E) corresponding to "Federal Amounts", "Subtractions", "Additions", "Total Amounts Using CA Law As If You Were a CA Resident", and "CA Amounts". Based on information I found on the CA Dept. of Revenue website, it looks like we need to put the dollar amount we received for the COBRA subsidy on line Z (other income) for item 8 in section B of part II. Be sure to put it only in column C and put "COBRA subsidy" in the blank space immediately to the left of column A. Then, put $0 in column E (amount received as a CA resident). From what I can tell, this is done because CA requires us to calculate all of our worldwide income for 2021 whether it was subject to CA taxation or not in order to calculate our effective tax rate. They appear to only use the amount for that purpose and do not actually tax the COBRA subsidy if you put $0 in column E.

One caveat is, as many people have noted, it is not easy to determine the dollar amount of your COBRA subsidy if you never were on COBRA before the subsidy or after the subsidy because the COBRA administrator was not required to send us anything showing amounts paid on our behalf (e.g. no monthly COBRA premium statements with dollar amounts were ever sent to us as recipients since no amount was due: it was fully paid for us by our former employer). If this is the case for you, you may need to contact your COBRA administrator to get a dollar amount that you can then use on your CA state income tax return.

If you ever find out that the method I indicate above is correct, please let me know.