how to deduct shareholder health insurance s-corp

Your health is your wealth so it’s no is surprise that most employers want to offer health insurance to their employees. However, for many S-Corp business owners the cost of insurance is too expensive to offer such a benefit.

Health Insurance Important to Employees

For some workers health insurance is nice to have but for others, particularly those who have to deal with chronic medical conditions, it’s literally a matter of life or death. A recent poll showed that 1 out of 6 workers keep their job just for the health insurance

How To Pay Health Insurance For S-Corp Owner

S-Corp owners who can afford to provide health insurance for their employees can deduct those payments. Health insurance premiums paid for S-Corp shareholders who own more than 2% of the company must be included in their Form W-2 as wages and deducted on Form 1040, Schedule 1. The increased wages on Form W-2 are not subject to Social Security, Medicare or unemployment.

The health insurance coverage must be in the name of the S-Corp and the greater than 2% shareholder must not have coverage on their own or through their spouse.

If the S-Corp does not make payment for the greater than 2% shareholder’s health insurance the premium payments would be taken as a medical expense on Schedule A of that person’s individual income tax return. The downside to this is that the greater than 2% shareholder may not have enough itemized expenses to benefit from medical expenses on their Schedule A.

In order for a greater than 2% shareholder to get an above-the-line deduction on Form 1040 for their health insurance coverage he or she needs to know the requirements. The S-Corp should secure the coverage in its name for the owner and make payment for the premiums. If the greater than 2% shareholder makes payment for the health insurance premiums the S-Corp should make a reimbursement to the shareholder.

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