Health and accident insurance premiums paid on behalf of a greater than 2-percent S corporation shareholder-employee are deductible by the S corporation
and reportable as wages on the shareholder-employee's Form W-2, subject to income tax withholding.
S-corporations can provide health insurance as a tax-free benefit to its non-owner employees
. This means the company offers group health insurance to employees and deducts the cost as a business expense, paying no taxes on the insurance premiums.
When it comes to health insurance, you're treated like a self-employed person as an S corporation owner.
You can deduct the cost of healthcare premiums for you, your spouse, and your dependents on Form 1040 Schedule 1
.
Again, the rules are relatively clear, but because they can affect a shareholder's ability to access cash on a tax-free basis, they are important to understand. As discussed,
premiums are not deductible
.
Health insurance premiums
can count as a tax-deductible medical expense (along with other out-of-pocket medical expenses) if you itemize your deductions. You can only deduct medical expenses after they exceed 7.5% of your adjusted gross income.
Premiums paid to private health services plans including medical, dental, and hospitalization plans.
They can be claimed as a medical expense, as long as 90% or more of the premiums paid under the plan are for eligible medical expenses
.
How do I report S-corp health insurance on W-2?
The health insurance premiums paid by the S corporation are reported on Form W-2,
Box 14 S
. This is the amount the shareholder deducts on page 1 of Form 1040, line 29 (Self- employed health insurance deduction)
Tax treatment by the company
The cost of health insurance premiums paid by the S corporation for a 2% shareholder is included in the shareholder's W-2 as
Box 1 taxable income
. The amount is subject to federal income tax withholding.
What deductions can an S-corp take?
- Going into Business Expenses. The costs of getting a business started are capital expenses, which must be deducted over the first five years you are in business.
- Auto Expenses. …
- Professional Fees. …
- Bad Debts. …
- Business Entertaining. …
- Travel. …
- Advertising and Promotion. …
- Education Expenses.
The premiums paid by the business can be deducted on your Form 1040 (line 29) and as a business expense on Form 1120S
.
When you're an S corporation owner with more than 2% of the company stock, you're treated the same as a self-employed person when it comes to deducting health insurance premiums. This is not a business deduction.
Can an S-corp owner take self-employed health insurance deduction?
If the medical insurance paid for by the S corp is properly reported on the shareholder's Form W-2, the greater than 2 percent shareholder should be able to take the self-employed health insurance deduction on their personal return. The S corp can deduct the expenses as wages.
So, premiums are deductible as a business expense only
when the insured is an employee and the company is not the policy's beneficiary
. Therefore, you should be able to deduct life insurance premiums on Schedule C of your 1040.
Pre-tax payroll deductions cannot be used by 2% shareholders to reimburse premiums paid by the S corporation. However,
2% shareholders can deduct the premiums using the self-employed health insurance deduction their personal federal income tax return
(i.e., on Form 1040).
Typically, the cost of key man life insurance is not tax deductible. Premiums must be paid with after-tax dollars.
Your company can only deduct key man insurance premiums if they're considered to be part of the employee's taxable income
, in which case the employee is typically the beneficiary.
To claim the deduction, your total unreimbursed medical expenses (which can include premiums for “qualified” long-term care insurance policies), have to be more than 7.5 percent of your adjusted gross income in 2022.
You may be eligible to claim the self-employed health insurance even if you don't itemize deductions
. This is an “above-the-line” deduction. It reduces income before you calculate adjusted gross income (AGI). However, this deduction cannot reduce your Social Security and Medicare tax.
What medical expenses are not tax deductible?
What medical expenses aren't tax deductible? Non-qualifying medical expenses include
cosmetic surgery, gym memberships or health club dues, diet food, and non-prescription drugs (except for insulin)
. Medical expenses are deductible only if they were paid out of your pocket in the current tax year.
Deduction Available under Section 80D of the Income Tax Act
Under Section 80D, you are allowed to claim a tax deduction of up to Rs 25,000 per financial year on medical insurance premiums
. This limit applies to the premium paid towards health insurance purchased for you, your spouse, and your dependent children.
Health and accident insurance premiums paid on behalf of a greater than 2-percent S corporation shareholder-employee are deductible by the S corporation and reportable as wages on the shareholder-employee's Form W-2, subject to income tax withholding.
The health insurance premiums paid on behalf of more-than-2% S corporation shareholder-employees are deductible and reportable by the S corporation as wages, the payments are included in the shareholder's wages for income tax purposes, and
the benefits are not subject to Social Security or Medicare (FICA) or
…
What is S-corp 2% owner?
According to the IRS, a 2% S corporation shareholder is
someone who owns more than 2% of the company's stock at any time during the year
. This also applies to individuals who own more than 2% of the company's voting power. S Corp shareholders include individuals, trusts, or estates.
What box in W-2 does S-corp owner's health insurance appears?
When you view the W-2 Summary Report or download the actual W-2 form, the year-to-date S Corp Health contributions will be added to the total in Box 1 for federal taxable wages, Box 16 for state taxable wages, and
Box 14
, with the label “SEHI” for Shareholder Employee Health Insurance.
