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Health insurance premium deductions?

Ok so I had to go on a COBRA plan at the end of 2007 when my daughter was born because I had to take an extended medical leave since she was premature and had many health complications. However, I also applied for Medical assistance from the state and they are still trying to decide if they are going to reimburse me for the premiums I already paid... SO, my question is, if I claim my premiums on my taxes for a deduction, and then medical assistance comes through and reimburses me for those premiums, will I have to pay the money back to either the IRS or the State that granted me medical assistance?!?

Public Comments

1. Yes. Since you took a deduction in a prior tax year, any reimbursement in a subsequent year is treated as taxable income and is reported as such, up to the amount of the deduction that you claimed. There is a way that you can handle this though. Don't claim the medical expense deduction on your return. You have 3 years to file an amended return and claim them, so let the state take it's sweet time. If you don't get reimbursed then file an amended 2007 return and claim the insurance payments then. You could flip it the other way around and file an amended return if they DO reimburse you but you'll be looking at penalties and interest for late payment that way so I don't recommend that.
2. First, see if your medical deductions exceed the 7.5% floor that you have to subtract. That means you must subtract 7.5% of your adjusted gross income from the total medical deduction {doctors' bills, dentist's bills, emergency room, unreim-bursed prescription drugs, handicapped equipment, health insurance premiums}; 10% when figuring alternative minimum tax. It is possible for you to pay 7200 in pre-miums and not receive ANY deduction because of that floor. You may not get any deduction, so launch a business. You have nothing to worry about either way because you pay the premiums out of your business name with a business checking account. It's labeled by the IRS Health insurance deductions for the self-employed. If you do get reimbursed, you subtract your health insurance premiums that were reimbursed and deduct only the net. There are restrictions, but it is a good idea to launch a business and use the high cost of health insurance to your advantage. In many cases you can deduct 7200,or even more, that could not otherwise deduct at all. If your business shows a decent income, you can knock that income down and save doubly on your taxes with the self-employed health insurance deduction!
3. Probably best to have a rest.looks like you can get some ideas here.http://health-insurance.expert-tip.info/affordable-individual-health-insurance-policies.html