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Why doesn't TurboTax Business lead you through deducting health insurance premiums as an S-Corp?

Forum|Forum|7 years ago
June 1, 2019
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I'm finding through reading elsewhere that my S-Corp can reimburse me for my health insurance premiums (including Part B Medicare), include that benefit in my wages (not subject to SS and HI), and then deduct that as an expense from earnings. Why doesn't TurboTax lead you through that situation?

TurboTax Business Windows

Best answer by NicoleU

Per the IRS, all Medicare Parts (including Medicare Part B) are insurance that constitutes medical care under section 162(l). Please see this IRS link, page 1, http://www.irs.gov/pub/irs-wd/1228037.pdf

If you are a more-than-2% shareholder in an S corporation, the policy can be either in your name or in the name of the S corporation. You can either pay the premiums yourself or the S corporation can pay them and report them as wages. If the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you.

You can deduct the premiums only if the S corporation reports the premiums paid or reimbursed as wages in box 1 of your Form W-2 (this would include your salary + health insurance premiums paid) in 2016. Therefore the health insurance portion will not be included in Boxes 3 and 5 because it is not subject to social security & medicare taxes. So this amount (box 1 of your Form W-2) would be reported on Line 7 Compensation of your Form 1120S.

Then this same amount from Box 1 of your Form W-2 will be reported on your Form 1040, on line 7. At this point, you will be able to take the "above the line" or adjustment to Income which is Line 29 Self Employed Health Insurance Deduction. This amount would be your health insurance premiums portion.

Please see this IRS link, page 32, Self-Employed Health Insurance Deduction: http://www.irs.gov/pub/irs-pdf/i1040gi.pdf

N

NicoleUAnswer

Employee

Per the IRS, all Medicare Parts (including Medicare Part B) are insurance that constitutes medical care under section 162(l). Please see this IRS link, page 1, http://www.irs.gov/pub/irs-wd/1228037.pdf

If you are a more-than-2% shareholder in an S corporation, the policy can be either in your name or in the name of the S corporation. You can either pay the premiums yourself or the S corporation can pay them and report them as wages. If the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you.

You can deduct the premiums only if the S corporation reports the premiums paid or reimbursed as wages in box 1 of your Form W-2 (this would include your salary + health insurance premiums paid) in 2016. Therefore the health insurance portion will not be included in Boxes 3 and 5 because it is not subject to social security & medicare taxes. So this amount (box 1 of your Form W-2) would be reported on Line 7 Compensation of your Form 1120S.

Then this same amount from Box 1 of your Form W-2 will be reported on your Form 1040, on line 7. At this point, you will be able to take the "above the line" or adjustment to Income which is Line 29 Self Employed Health Insurance Deduction. This amount would be your health insurance premiums portion.

Please see this IRS link, page 32, Self-Employed Health Insurance Deduction: http://www.irs.gov/pub/irs-pdf/i1040gi.pdf