Health Insurance Deduction for S-Corp Owners (2%+ Shareholders)

1. Company Pays Premiums

The S-Corp pays your health insurance premiums directly OR reimburses you. Either way, it’s considered compensation.

2. Include Premiums in W-2

Premiums must be included as wages on your W-2, Box 1 (but not in Social Security/Medicare wages in Boxes 3 & 5).

3. Take the Deduction

You can then deduct the premiums on Schedule 1 (Form 1040), Line 17 under “Self-Employed Health Insurance Deduction.”

So it goes like this:

S-Corp pays → You report as income → You deduct personally

This satisfies IRS rules and ensures you legally get the deduction.

---

Common Health Insurance Deduction Mistakes to Avoid:

• Not including premiums on W-2 – You lose the deduction if this step is skipped.

• Using an HRA or health insurance plan not in your name or S-Corp’s name – Deduction may be disallowed.

• Not showing net income – You can’t deduct more than the business’s profit.