S Corp Health insurance tax deductibility 1

[glass99]

For the S corp owners out there: As you probably are aware, the owners' health insurance premiums pass through as taxable income on your personal 1040, which is a very expensive and unfair from a tax perspective. Is there a workaround for this? Going on a spouse's insurance would work, but I personally don't have that option. I have asked my accountant and he doesn't have any easy answers, but I suspect there are more complicated options. Perhaps converting to a C corp?

https://www.irs.gov/businesses/smal...ion-compensation-and-medical-insurance-issues

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[FSS]

phamENG has explained it very well in the above posts. I don't understand why your accountant has not said the same. It's pretty straightforward.

 

[glass99]

phamEng is quoting from the Turbotax website, which I think is not correct. The IRS language is pretty clear that medical premiums are taxable at the personal level:

"Health and accident insurance premiums paid on behalf of a greater than 2-percent S corporation shareholder-employee are deductible by the S corporation and reportable as wages on the shareholder-employee's Form W-2, subject to income tax withholding."

 

[phamENG]

glass99 - not Turbotax, IRS.

That is not clear that it's taxable at the personal level. It's clear that it's subject to income tax withholding. Most Americans have more taxes withheld than they actually owe.

"if the shareholder purchased the health insurance in his own name but the S corporation either directly paid for the health insurance or reimbursed the shareholder for the health insurance and also included the premium payment in the shareholder's W-2, the shareholder would be allowed an above-the-line deduction."

This language, to me, says that under the right circumstances that money which is withheld may be returned to you.

 

[IceNine]

Agree with phamENG on this one, and so does my accountant. I always get an above-the-line deduction for my S-Corp health insurance premiums.