For many Americans, unemployment offers the first shocking introduction to the expense and complexity of the health care system. When you have an employee-sponsored health plan with reasonable co-payments, it's easy to take health coverage for granted. But if you lose your job, your health insurance coverage is extended for a few months by COBRA, and after that, you're on your own.
For tax purposes, you are allowed to deduct all un-reimbursed out-of-pocket medical expenses that exceed 7.5 percent of your adjusted gross income [source: IRS]. Those limits sound high at first, but consider all of the medical expenses that you can deduct:
- COBRA insurance payments or individual insurance coverage
- Out-of-pocket doctor's visits
- Unreimbursed hospital bills
- Prescription drugs
- Travel for medical treatment (mileage) [source: Block]
If you're over 50 and lost your job primarily due to foreign competition, you might be eligible for the Health Coverage Tax Credit, which pays up to 72.5 percent of qualified health insurance premiums [source: IRS]. The requirements for this credit are very specific, but if you qualify, it's a tax break that you can't afford to pass up.