How to get a Deduction for S Corporation Owner Health Insurance Premiums

Marginal tax brackets for 2023 tax year

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There are many benefits to S corporation status for your small business. However, fringe benefits are severely reduced for owners of S corporations. However, there is one way you can deduct your health insurance premiums. If you will follow the below instructions exactly as stated, you can get your health insurance premiums deducted on your tax return.

Step 1. Your S corporation needs to pay for the insurance premiums.

Step 2. The health insurance premiums must be included on your W-2 as taxable income. But this income is not subject to payroll taxes (Social Security and Medicare). In other words, the S corporation includes the additional compensation in box 1 of the W-2 but not in boxes 3 or 5.

Step 3. You must be eligible to claim the health insurance deduction as an above-the-line self-employed health insurance deduction on Form 1040.

You cannot take the deduction if you are eligible to be included on your spouse’s health insurance.

David M. Snyder, CPA
David Mitchell Snyder, CPA, LLC
1874 Gulf to Bay Blvd
Clearwater, FL 33765