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You may report the cost of health insurance as your income or as your spouse's income - that makes no difference for tax treatment.
Your spouse is treated as indirect owner of S-corporation.Several issues...
1.S-corporation wants to deduct the cost health insurance premiums - correct?
If yes - these expenses must be reported as wages for more than 2% shareholder-employee - and deducted as wages.
Otherwise - there is no deduction.
2.The shareholder- employer might want to deduct that cost on his/her tax return - correct?
If yes - that amount must be reported as wages on W2 form..
So that woudl be for the taxpayer's advantage to report health insurance premiums in box 1 as wages (but do not include that amount in boxes 3 and 5)