Eligibility
To deduct health insurance as an S corp owner, you must meet the following criteria:
- You must be a more-than-2% shareholder of the S corporation.
- You must be an employee of the S corporation and receive wages from the S corporation.
- The health insurance policy must be in your name, or in the name of your spouse or dependent, or if you have employees, it can also be in the name of the company.
- You and your spouse must not have access to employer-subsidized health insurance.
How it works
The S corporation will pay your health insurance premiums. The premiums will be included in your W-2 income in Box 1. You can then deduct the amount of the premiums on your personal tax return, up to the amount of your earned income from the S corporation.
Calculating the deduction
To calculate the deduction, you will need to know the amount of your health insurance premiums and your earned income from the S corporation. The deduction is calculated as follows:
Amount of health insurance premiums paid
– Earned income from S corporation
= Deductible amount
Written out in words is means that you can deduct the amount of your health insurance premiums paid during the year, up to the amount of your earned income from the S corporation.
For example, if your S corporation paid $10,000 in health insurance premiums on your behalf, and you earned $50,000 in wages from the S corporation, you can deduct $10,000 on your personal tax return as an adjustment to income.
Reporting the deduction
To report the deduction on your personal tax return, you will need to file Form 1040 and include Schedule 1. On Schedule 1, you will report the deduction as part of “self-employed health insurance”.
Keeping accurate records
It is important to keep accurate records of your health insurance premiums and related expenses. This includes receipts, invoices, and other documentation that shows the amount of your health insurance premiums and the payments made by your S corporation.
Conclusion
Deducting health insurance as an S corp owner can provide significant tax savings. However, it is important to meet the eligibility criteria, calculate the deduction correctly, and report it on your personal tax return. If you have any questions or need further guidance, consult with a tax professional or accountant.
Here are some additional tips for deducting health insurance as an S corp owner:
- Make sure the health insurance policy is in your name, or in the name of your spouse or dependent.
- Have the S corporation pay the health insurance premiums directly to the insurance company.
- Keep accurate records of your health insurance premiums and related expenses.
- File Form 1040 and include Schedule 1 to report the deduction.
