If the S corporation's only employees are shareholders, the S corporation cannot provide health insurance as a tax-free benefit. Essentially, for shareholders with more than a 2% share in the S corporation, any health insurance premiums must be included as compensation. Health insurance premiums are then treated as taxable income. The deduction comes on the shareholder's 1040.
To be deductible on your 1040, you can either purchase a personal health insurance plan which gets reimbursed by the company or have the S corporation purchase it for you directly and pay the premiums.
Insurance laws in some states do not allow a corporation to buy group health insurance when the corporation only has one employee. Therefore, if the shareholder was the sole employee of the corporation, then the shareholder has to purchase health insurance in the individual’s own name.
The qualifying insurance payments by the s corp go on line 7 page 1 of the corporation's return. Also included in box 1 wages on w-2 and noted in box 14 something like "s-corp med ins" $$$
