there are rules that the S-corp and shareholder must follow so the 2% shareholder can deduct the SE health insurance on his 1040.
if S-corp paid the premiums directly for the 2% shareholder. the S-corp is supposed to deduct them as compensation to the shareholder and must include them as compensation line 1 of w-2 and as info in box 14.
if the shareholder pays directly the premiums on a policy in their name, the S-Corp must reimburse them and proceed as above in reporting on corporate return and shareholder w-2. (Notice 2008-1)
