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Or Lev" S-Corp shareholder question: Does the following rule…

quot;For Lane or Lev"S-Corp shareholder...
quot;For Lane or Lev"S-Corp shareholder question: Does the following rule for deducting health insurance premiums on line 29 of the 1040 apply if the shareholder owns 100% of the company and there are no employees?For an employee who is a more than 2% shareholder (and for any person who owns, or is considered to own within the meaning of Sec. 318, more than 2% of the outstanding stock; see Sec. 1372(b) and 318), report group premiums paid in box 1 of his or her Form W-2. Do not include them in box 3 or 5 for Social Security or Medicare tax purposes. Since a more than 2% shareholder is treated as a partner for the purpose of the self-employed health insurance deduction, the shareholder/employee can deduct the premiums on page one of his or her Form 1040 so that the net effect to his or her income is that the wages are included in income, but the health insurance premiums paid by the company are, in effect, excluded by the netting of the deduction against the same amount included in wages. This is the most straightforward case, and will apply to larger S corporations that have group plans in place and pay reasonable wages to their more than 2% shareholders who work in the business.In other words, can the 100% shareholder deduct the ACA premiums paid on his behalf by the corp on his personal return?
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Answered in 44 minutes by:
1/18/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,272
Experience: Taxes, Immigration, Labor Relations
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Health insurance premiums are ONLY deductible for employees of S-corporation.

If the taxpayer is the shareholder of S-corporation but is not an employee - no deduction on line 29 is allowed.

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Customer reply replied 6 months ago
He is an employee. He is a 100% shareholder employee with wages and payroll tax deductions. Is this allowed. He has no other employees, but himself at this time.
Customer reply replied 6 months ago
Also, the stars are grayed out on the rating system and I am unable to select and submit. Can you unlock?

Yes - if he is an employee and 100% shareholder - we need to follow certain rules

Because you can't treat a 2% shareholder of an S corporation as an employee for this exclusion, you must include the value of accident or health benefits you provide to the employee in the employee's wages subject to federal income tax withholding. However, you can exclude the value of these benefits (other than payments for specific injuries or illnesses) from the employee's wages subject to social security, Medicare, and FUTA taxes.

If you are a more-than-2% shareholder in an S corporation, the policy can be either in your name or in the name of the S corporation.

You can either pay the premiums yourself or the S corporation can pay them and report them as wages. If the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you.

You can deduct the premiums only if the S corporation reports the premiums paid or reimbursed as wages in box 1 of your Form W-2 in 2017 and you also report the premium payments or reimbursements as wages on Form 1040, line 7.

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Lev
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