But when I was a sole proprietor I was able to pay my healthcare premiums directly and not worry about the Schedule A limitations. What gives? A sole proprietor does not have the same requirements as an S-Corp. An S-corp provides tax advantages (like reducing your payroll taxes) but increases the complexity of compliance. The cost of the sole proprietor can be higher taxes but you get the benefit of simplified reporting. As a sole proprietor you didn't have to do anything special to get an "above the line" deduction on your medical premiums. We like above the line deductions because it results in bigger tax benefits. As an S-corp you can't only pay the premiums directly and get the same benefit. Okay, well then how do I deduct them as an S-corp? You will report the premiums paid on your W2 as wages in box 1 and box 14. The good news even though it is reported on your W2 as wages, it is not exposed to the expensive payroll taxes (FICA or FUTA) you were trying to avoid with the S-corp structure. Instructions how to do this are located: Gusto. For example, you have $20,000 of medical premiums and your base salary is $70,000. On your W2, you would report wages of $90,000 in box 1 (base salary plus premiums). Then in box 3 & 5, for wages subject to payroll taxes, you would report $70,000. In box 14, you would report the $20,000 of premiums paid.
 Wait my W2 reports higher wages, then aren’t I taxed more on that income? No you are not taxed more because the S-corp is able to deduct the cost of the premiums from its gross income. So your wages go up but there is a corresponding decreases in income from the S-corp. That nets you out in the same place. Continuing with our prior example, say the business made $200,000 before your salary of $70,000. The S-corp would report $110,000 of net income, not $130,000. The extra $20,000 reported on W2 Box 1 also reduced your net income. But I already paid out of pocket for my health insurance this year. Is it too late to get any benefit? If you have already paid out of pocket for your premiums - it’s not too late! Make sure the S corporation reimburses you for all premiums paid and then reports the premiums as additional income in Box 1 of your W-2. So long as the premiums are ultimately paid by the S corporation and reported as taxable compensation on the employee-shareholder’s W-2, the IRS has historically allowed an above-the-line deduction of the premiums. What about my other employees, do they have to include their portion of health insurance in their wages? No. The addition to wages is only necessary for shareholder-employees who own more than 2% of the company who also want the above-the-line adjustment for the premiums paid on their behalf. Instead, employees are getting fringe benefits from the S corporation. Excellent! This has been helpful. Can you help me out to execute
this?Yes, we'd love to! Email and say you'd like a hand. Talk soon! Health and supplemental insurance premiums paid by an S corporation on behalf of a shareholder may be deductible from an officer's W-2 wages. Prior to your final payroll of the year, please share the total cost of your health and/or accident insurance premiums and HSA amounts with ASAP to report on your W-2. The cost of health, dental, vision, supplemental/AFLAC, and long-term care premiums, as well as HSA contributions paid by an S corporation on behalf of a shareholder are deductible, so as long as the company has fulfilled the requirement to report amounts on the officer's W-2. These amounts increase the officer's Federal & State taxable wages, but are exempt from Social Security / Medicare and FUTA. Therefore, these amounts
are included in Box 1 - Wages on a W-2, but not in Boxes 3 or 5. While not required, we typically include the amount as a memo in Box 14 - Other as a courtesy for your tax preparer. At a glance, it may appear that increasing your taxable wages also increases your tax liability. However, you should be able to deduct the amount on your 1040
return (Self-Employed Health Insurance Deduction Worksheet as long as health insurance premiums paid or reimbursed by the S corporation are shown as wages on your W-2. Your account manager may start requesting this 2% shareholder health amount in early December. If ASAP is not providing you additional accounting
services, please compile an accurate sum of all premiums paid for or reimbursed by the corporation on behalf of the officers and their dependents. If you have an HSA amount paid for by the company, please provide an itemized report. Disclaimer: This information is provided as a self-help tool and does not constitute legal or financial advice. Laws, regulations and lending products are changing daily and decisions as to whether or how to use this information and/or what actions to take are solely those of the
employer. The providers of this information disclaim any and all responsibility and liability for its accuracy, completeness or fitness for your particular business purposes. Can an S Corp pay for health insurance for employees?Just like other business structures, S corporations can offer health insurance premium coverage for their non-owner employees as a tax-free fringe benefit. The employee doesn't get taxed for it, and the company can deduct the contributions on its business tax return.
Can a business owner deduct health insurance premiums?Health insurance premiums are deductible as an ordinary expense for self-employed individuals. Whether you purchase the policy in your name or have your business obtain it, you can deduct health insurance premiums paid for yourself, your spouse, a dependent child or a nondependent child under age 27.
Can 1120s deduct health insurance premiums?Self-Employed Health Insurance Deduction
You may be able to deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents.
Do S Corp shareholder health insurance premiums go on w2?The policy must be in the name of the S corporation or if the shareholder is the only employee the policy can be in the name of the shareholder. The premiums must be paid by the corporation and included on your Form W-2 as wages.
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Can an s corp deduct health insurance premiums for employees
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