Tax repercussions of severance made up of salary and money for future COBRA coverage?

[lkmiss]

Colorado

My spouse was let go from his non profit job without cause. Contract only has stipulations if let go with cause. However, he has received a severance offer which is a few months salary in addition to money to cover 18 months of COBRA.

My question is whether there is any way the payment should be structured to reduce the tax consequences for the money slated to cover health benefits so it is not all taxed as earned income like his salary will be? Otherwise, the money will not end up covering 18 months of COBRA since it would be reduced by taxes. If it can only be paid in the lump sum, what is the point of them allocating X amount for salary and X amount for COBRA unless it is an accounting consequence on the employer side?

Also, I would presume if he has to file for unemployment, the total sum received would impact when he could start receiving benefits.

Is there a way to structure the payment to separate the two out or is a lump sum check the only way he can get the severance causing the COBRA money to be taxed?

 

[commentator]

He needs to file for unemployment benefits immediately, and tell them all about the severance How it is paid out will not be the big decider, as income is actually not an issue in receiving unemployment. But he must tell the state exactly what he's getting in severance and how he's getting it and let them make the decision about when he'll be able to begin receiving unemployment benefits.

 

[ecmst12]

Money paid for insurance premiums is tax deductible so you'll get the extra taxes back at the end of the year anyway.

 

[LdiJ]

Money paid for insurance premiums is tax deductible so you'll get the extra taxes back at the end of the year anyway.

I agree, whatever money is actually spent on Cobra premiums will be tax deductible in the year that it is paid.