4 steps for S-Corps owners to claim Health insurance Expense
If you are a more than 2% owner of an S corporation, you need to do four things to be able to claim a deduction for your health insurance:
- The S Corporation has to pay directly or reimburse you for the health insurance premiums.
- The expense must be recorded in the S corporation’s books.
- Your S corporation must include the health insurance premiums on your W-2 form.
- You claim the health insurance deduction as an above-the-line deduction on your Form 1040.
The four-step health-insurance procedure also applies under the attribution rules (and this could be a surprise) to your spouse, children, grandchildren, and parents if they work for your S corporation, even if they don’t own a single share of the S corporation stock directly.
You need to get this S corporation health-insurance thing right. Without the W-2 treatment, the S corporation does not get a tax deduction. With the correct W-2 treatment, the more than 2% shareholder with the health insurance premiums reported on the W-2 can claim the self-employed health insurance deduction on Form 1040, provided is not eligible for employer-subsidized health insurance through another job or a spouse’s job.
The best recommendation we can give you is for you to speak with your accountant, bookkeeper, or tax professional to make sure you are handling these expenses correctly on your payroll, books, and reports. It’s important you do this before the end of the year when corrections can still be made.
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