The S corporation can deduct the cost of health premiums paid for 2% shareholders on its Form 1120S income tax return . Since the premiums are treated as additional compensation to the shareholders, the deduction should be taken on page 1, Line 7 (Compensation of officers) or Line 8 (Salaries and wages).
If you provide health insurance to employees who own more than 2% of stock in your S Corp, the premiums are tax deductible for your company . And, the premium amounts are taxable for your employees. You must include the amount of the S Corp shareholder health insurance premium in the employee's taxable wages.
(A 2-percent shareholder is someone who owns more than 2 percent of the outstanding stock of the corporation or stock possessing more than 2 percent of the total combined voting power of all stock of the corporation .)
Health Insurance Premiums for a more than 2% shareholder of a S-Corporation are reported in Box 14 of the individual's Form W-2 Wage and Tax Statement .
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 .
Can my S Corp reimburse health insurance?
Your deduction is limited to the amount of wages you are paid each year by your S corporation . You get the deduction whether you purchase your health insurance policy as an individual or have your S corporation obtain it. However, your S corporation must pay the premiums for you to get the deduction.
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 ...
Since 2% shareholders are treated as self-employed individuals and not employees, they may not participate in a Section 125 cafeteria plan . This means they are ineligible to make pretax contributions for insurance, FSAs and/or HSAs.
Health Savings Accounts (HSA)
If the S Corporation contributes to the HSA on behalf of a greater than 2% owner, these contributions are treated as income and added to the shareholder's wages. They are reported in box 1 of the form W-2 as wages .
A plan providing medical care coverage for the 2-percent shareholder-employee in an S corporation is established by the S corporation if: (1) the S corporation makes the premium payments for the accident and health insurance policy covering the 2-percent shareholder-employee (and his or her spouse or dependents, if ...
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)
How much salary should S Corp owner take?
A commonly touted strategy to set your S Corp salary is to split revenue between your salary and distributions — 60% as salary, 40% as distributions . Another common rule, dubbed the 50/50 Salary Rule is even simpler, with 50% of the business income paid in salary and 50% in profit distribution.
The premiums paid by the business can be deducted on your Form 1040 (line 29) and as a business expense on Form 1120S .
A 2% shareholder is any person who owns – directly or indirectly, on any day during the taxable year – more than 2% of the outstanding stock or stock possessing more than 2% of the total combined voting power of the corporation.
What is S Corp 2% owner?
(A 2-percent shareholder is someone who owns more than 2 percent of the outstanding stock of the corporation or stock possessing more than 2 percent of the total combined voting power of all stock of the corporation .)
- Settings > Payroll Settings > Update S Corp Owner Health Insurance.
- Select the employee's name.
- The effective date of this entry will be December 31st of the current year. ...
- Enter the dollar amount of company-paid premiums.
- Click Save.
You may be able to use the Self-Employed Health Insurance (SEHI) deduction if you're at least a 2% shareholder in an S Corporation . To claim this deduction, the health insurance premiums must be paid or reimbursed by the S corporation and reported as taxable compensation in box 1 of your W-2.
A 2% shareholder is not considered an employee for fringe benefit purposes and so cannot exclude the cost of the premiums from gross income as employer-provided coverage under an accident or health plan.
