Health insurance premiums paid for S Corporation owners/shareholders are possibly tax deductible, but there are a couple of items to keep in mind for this tax deduction to stand up to IRS scrutiny. The business needs to either pay the health insurance premiums directly to the provider or reimburse the S Corporation owner/shareholder if he or she is paying the premiums. Regarding reimbursement, ideally the S Corporation owner/shareholder will turn in an expense reimbursement report to the business and the business will issue a reimbursement check to the S Corporation owner/shareholder for the health insurance premiums paid by the S Corporation owner/shareholder. Or, if the S Corporation owner/shareholder takes monthly draws from the business, a portion of the monthly draw can be specifically allocated as reimbursement for health insurance premiums.
Health insurance premiums paid for S Corporation owners/shareholders need to be reflected on the annual W-2 forms for the S Corporation owners/shareholders. Please contact us if you have questions about how this needs to be reported.
