Enter in the category of Officer's Wages. This technique is an excellent tax-saving technique, but you do need to be careful not to double-report the deduction. Since you have included the premiums as part of your wages/salary (which will get deducted on your personal return), you do not take a second deduction against the premiums paid.
If you also made 401(k) pre-salary contributions as an employee, you include these as officer wages as well. To illustrate: Your salary is 50,000, your 401(k) is 5,000 (reducing taxable salary to 45,000), and your health insurance premiums are 5,000 (raises taxable income but not SS/Medicare taxable amount). You are reporting Officer Wages of 55,000, even though your W2 will look like this:
Box 1 (Wages + Premiums included in Wages-401(k) pre-tax contributon): 50,000
Box 3 (Wages only, 401(k) does not deduct from SS taxation): 50,000
Box 5 (Wages only, 401(k) does not deduct from Medicare taxation): 50,000
It does matter that you report your wages this way, because, an S-Corp must pay it's officers reasonable compensation. By including the 401(k) contributions and the health insurance premiums, you can raise the amount of reported salary, which helps fulfill the reasonable compensation requirements.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
