S corporations continue to enjoy good news in 2018 when it comes to health insurance, and this also applies to 2017 taxes.
You first have to thank the 21st Century Cures Act for:
- Reinstating and extending IRS Notice 2015-17 to eliminate the $100-a-day penalty
- Creating the qualified small employer health reimbursement account (QSEHRA) that works well if there are employees in the corporation
The good news is, the old rules still apply as we write this, and we don’t expect any changes in 2017 or 2018. Under these rules, the S corporation first establishes a health insurance plan for the owner in one of two ways:
- Choice 1. The S corporation makes the premium payments for the accident and health insurance policy covering the owner-employee who has more than 2 percent ownership (and his or her spouse or dependents, if applicable).
- Choice 2. The owner-employee makes the premium payments to the insurance company and furnishes proof of the premium payments to the S corporation, which in turn reimburses the owner-employee for the premium payments.
This is Step 1—getting the cost of the insurance on the S corporation’s books.
In Step 2, the S corporation has to include the health insurance premiums on the owner-employee’s W-2 form. The income is not subject to payroll taxes (Social Security and Medicare).
In Step 3, the owner-employee then claims the health insurance deduction on page 1 of Form 1040, providing he or she otherwise qualifies for the page 1 deduction.
If you need help with getting the maximum tax deduction for Health Insurance for your S-Corp get in touch for a free consultation.
Scott Walley CPA LLC
PO Box 56
Bend, OR 97709