C-corporation is a separate legal and taxing entity.
While you own shares of C-corporation - it has its own way to deduct business related expenses and will file its own tax return.
To be deductible - that should be C-corporation's expenses - not your expenses - that is very important point.
Unlike S-corporation - C-corporation is not required to pay wages. C-corporation may pay wages and MAY deduct reasonable wages (those you may justify).
As I mentioned above - C-corporation may deduct only its own expenses.
If you are an employee - C-corporation may reimburse your job related expenses under so-called accountable plan. An accountable plan is not taxable to your employee. Amounts paid under an accountable plan are not wages and are not subject to income tax withholding and payment of social security, Medicare, and Federal Unemployment (FUTA) Taxes.
In order to qualify as an accountable plan, your reimbursement or allowance arrangement must require that your employees meet all three of the following rules:
(1) There must be a business connection to the expenditure. This means that the expense must be a deductible business expense incurred in connection with services performed as an employee. If not reimbursed by the employer, the expense would be deductible by the employee on his/her 1040 income tax return.
(2) There must be "adequate" accounting by the recipient within a reasonable period of time. This means that your employees must verify the date, time, place, amount and the business purpose of the expenses. Receipts are required unless the reimbursement is made under a per diem plan.
(3) Excess reimbursements or advances must be returned within a reasonable
period of time. Reasonable depends upon facts and circumstances.
A qualified personal service corporation is taxed at a flat rate of 35% on taxable income. You generally may have taxable income zero and avoid corporate income taxes and dividends all together.
I would still investigate your state corporate tax liability.
A corporation is a qualified personal service corporation if it meets both of the following tests.
-- Substantially all of the corporation's activities involve the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting.
-- At least 95% of the corporation's stock, by value, is owned, directly or indirectly, by employees performing the services listed above, retired employees who had performed such services, any estate of an employee or retiree described above, or any person who acquired the stock of the corporation as a result of the death of an employee or retiree (but only for the 2-year period beginning on the date of the employee's or retiree's death).
You are correct that C-corporation may deduct health insurance premiums paid for employees - but not reimbursment for the cost. That should be plan established under C-corporation. I might suggest to contact your health insurance provider and verify if teh health insurance woudl be established under teh name of your C-corporation - will or will not that affect the cost?
Overhead expenses for filing income tax and employment tax return for C-corporation mioght be a little higher for C-corporation. As a raw estimate - I would put $1k aside for that reducing your projected tax saving.
So as you are currently paying about $450/month - total $5400 in after tax dollars. Assuming you are in 25% tax bracket plus 2.9% self-employment taxes - total ~28% - you need $7500 income - so your possible tax saving would be $2100.
Minus overhead expenses fro keeping C-corporation ~$1000
Minus additional employment taxes for your spouse - ?
So far - your potential NET saving doesn't look very attractive...
However - you might have other reasons for having C-corporation?