One of the crazy things in the tax code. The health insurance paid for a 2% or more S-Corp shareholder becomes a deduction on one of the wage lines on the return. However, the amount is then included in the taxable wages of the shareholder. In a one-shareholder S-Corp, the result would net to zero. However, the tax laws provide that the shareholder can deduct this as self-employed health insurance on Schedule 1. With the proper entries in Turbotax tjhis should be automatic. Other health insurance does not qualify for this special treatment. It is includable as a medical expense on Schedule A. This may not produce any tax benefit because only medical expenses in excess of 7.5% of adjusted gross income is included as part of itemized deductions, and then your itemized deductions would have to exceed your standard deduction unless you are a taxpayer that must itemize.
there are additional rules for what can be counted as shareholder medical insurance. The health insurance plan must either be in the name of the S-Corp andthe premiums paid by it, or under an accountable plan between the S-Corp and shareholder, the S- Corp reimburses the shareholder for the premiums paid by the shareholder. Also, failure to include the applicable premiums on the shareholder's W-2 makes them non-deductible by the S-corp and the shareholder. This does not apply where the premiums are not paid or reimbursed by the S-corp. they are an eligible medical expense as described above.
