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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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health insurance

Resolved Question:

health insurance
Submitted: 7 years ago.
Category: Tax
Expert:  Merlo replied 7 years ago.
Hello bob,

Did you have a tax question we can help you with?

Customer: replied 7 years ago.
What types of health care deductions / payments can you make. Can you pay for your health care premiums, etc. What else can you pay for as far as benefits inside a Sub S?
Expert:  Merlo replied 7 years ago.
Hello bob,

S Corporations do not have the more flexible rules that a C Corporation has when it comes to paying fringe benefits to any shareholder who holds a 2% or more interest in the company.

Any benefit that you provide for a 2% or more shareholder is not deductible by the corporation as an expense, and the value of the benefit must be included in the shareholder's reported taxable earnings. By including the amount as taxable income to the shareholder, that is the only way that an S Corp gets the benefit of deducting the expense.

Since the shareholder must include the value of the health insurance premiums in his taxable income, then the shareholder may claim a deduction for the cost of this insurance on his personal tax return.

The only benefits which an S Corp may provide to a 2% or more shareholder which can be deducted by the S Corp and excluded from the shareholder's taxable income are:

1. Dependent care assistance under Sec. 129.

2. Educational assistance programs under Sec. 127.

3. Qualified employee discounts, no-additional-cost services, working-condition fringe benefits, on-premises athletic facilities and de minimis fringe benefits, under Sec. 132.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you bob.

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