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Avoid This Family-Member S Corporation Health Insurance Mistake

Written by Coach Janelle CPA on April 5, 2023

There are two important issues related to health insurance deductions for S corporations. First, if you own more than 2 percent of an S corporation, there are three steps you need to follow to claim a deduction for health insurance:


Step 1. The cost of the insurance must be on the S corporation’s books.


Step 2. The corporation must include the cost of the health insurance premiums on your W-2 form as taxable income (but not subject to payroll taxes).


Step 3. If eligible, you must claim the health insurance deduction as an above-the-line deduction on Schedule 1 of Form 1040.


Second, this three-step procedure applies to your spouse, children, grandchildren, great-grandchildren, parents, grandparents, and great-grandparents if they work for your S corporation and the corporation covers them with health insurance.


The three rules apply to the relatives listed above who work in the S corporation, even if they don’t own any stock directly. For health insurance purposes, the tax code attributes your stock ownership to them and deems that they own what you own. It’s crucial to get this right, as failing to do so could result in a lost health insurance deduction for your family members and zero deductions or the S corporation. If you or your S corporation did not handle this correctly in the past, you need to amend the returns to ensure that you create and protect the proper tax deductions.


Are you tired of feeling overwhelmed and confused by your business's tax situation? Do you wish you had a tax expert on your team to help you navigate the complex world of tax strategy planning? Look no further than Coach Janelle CPA! As a seasoned tax professional with years of experience working with business owners, Coach Janelle can help you take control of your business's tax situation and develop a comprehensive tax strategy plan that maximizes your deductions and minimizes your liabilities.


With Coach Janelle's guidance, you can rest assured that your business is in compliance with all relevant tax laws and regulations while also taking advantage of every possible tax-saving opportunity. Don't let tax season stress you out anymore. Contact Coach Janelle CPA today to schedule a consultation and start developing a customized tax strategy plan that works for your unique business needs. With her expert guidance, you can take control of your taxes and achieve financial success for your business.

About Coach Janelle CPA

My passion is to help 6 & 7- figure+ earners see their financial possibilities through financial literacy and strategy. 

I want to help you save on taxes so you can keep more of your money to live the life you dream of and have worked for NOW, and build wealth and equity for the next generation.

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