“Are you a shareholder of an S-corporation and wondering if you can deduct your health insurance costs? Well, the good news is that there may be deductions available for those who meet certain criteria. But before you start celebrating, it’s important to understand the rules and regulations surrounding this deduction. In this blog post, we’ll dive into everything you need to know about S-corp shareholders’ health insurance deductions – so buckle up, grab your calculator and let’s get started!”
S-corp shareholders and health insurance
Yes, S-corp shareholders can deduct health insurance; however, there are certain rules and regulations that must be followed in order to do so. Health insurance is considered a business expense, and as such, is only deductible if it is used to pay for medical expenses that are not reimbursed by another source. In addition, the deduction can only be taken if the shareholder is actively engaged in the business – meaning that they cannot be a passive investor.
If you’re an S-corp shareholder and you’re looking to deduct your health insurance premiums, make sure you consult with your accountant or tax advisor to ensure you’re following all the necessary rules and regulations.
What types of health insurance can S-corp shareholders deduct?
As an S-corp shareholder, you can deduct the cost of your health insurance premiums on your personal income tax return. This includes both the premiums you pay for yourself and any family members who are covered under your policy. In addition, you can also deduct any out-of-pocket medical expenses that you incur, such as co-pays or prescriptions.
How to deduct health insurance as an S-corp shareholder
Yes, S-corp shareholders can deduct health insurance as an eligible business expense. However, there are a few things to keep in mind when doing so.
First, the expenses must be for medical care as defined in section 213 of the Internal Revenue Code. This includes expenses for diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any structure or function of the body.
Second, the payments must be made by the corporation on behalf of the shareholder-employee. This means that the corporation must pay the premiums directly to the insurance company or to a third-party administrator.
Third, only premiums for coverage that begins after the date that the S election is effective can be deducted. This is because deductions are only allowed for expenses incurred during the tax year.
Fourth, if the shareholder-employee is also covered by a spouse’s health insurance plan, then only the portion of premiums attributable to coverage of the shareholder-employee can be deducted. This is becauseonly expenses for medical care that would not have been incurred but forthe presence of a health condition can be deducted.
Finally, keep in mind that Self-Employment Tax (SECA) applies to S-corp shareholders who deduct their health insurance premiums as business expenses. This tax is equal to 15.3% of your net earnings from self-employment (line 3 of Schedule SE).
Pros and cons of deducting health insurance as an S-corp shareholder
As an S-corp shareholder, you may be able to deduct health insurance premiums on your personal tax return. This can be a significant tax savings, especially if you are in a high income tax bracket. However, there are a few things to consider before taking this deduction.
First, you must be a shareholder in the S-corp. This means that you own at least 1% of the company’s stock. If you are not a shareholder, you cannot take this deduction.
Second, the health insurance must be purchased through the S-corp. You cannot deduct premiums paid for individual health insurance policies.
Third, the health insurance must be for yourself and your family members. You cannot deduct premiums paid for employee health insurance plans.
Fourth, you can only deduct the portion of premiums that are paid by the S-corp. If your company pays 100% of the premium, you can deduct the entire amount on your personal tax return. If your company only pays 50% of the premium, you can only deduct 50% on your return.
Finally, keep in mind that taking this deduction will increase your taxable income. This may put you in a higher tax bracket and result in paying more taxes overall. You should speak with a tax professional to see if taking this deduction is right for you.
Conclusion
In conclusion, S-corp shareholders are able to deduct health insurance premiums for their businesses. The process of doing so is complicated and it’s important that any S-Corp shareholder who wants to take advantage of this deduction understands the rules and regulations surrounding it completely before attempting to do so.
Additionally, there may be tax implications involved in taking this deduction depending on your individual income or business situation. It is always best to consult with a qualified accountant when making decisions like concerning taxes and deductions.
