S-Corp health insurance deduction and Premium Tax Credit

[GR77]

For years I have been purchasing personal health insurance outside the marketplace and having my S-Corp pay the premiums. I include the cost of the health insurance on my W-2 as a benefit to > 2% shareholder. This has allowed me to then deduct the premiums on my 1040. I would then take the $12K as a tax credit on the 1040 so the overall cost to me for the 2002 plan would be $6,000 but the S-Corp would be able to deduct $18K.

In 2022, due to the American Rescue Plan I will be eligible for a premium subsidy so I will be purchasing a plan on healthcare.gov. My plan will cost $1,500 per month and I will be eligible for a $1,000 per month subsidy. I can have the subsidy paid each month or I can pay the full $1,500 premium each month through the S-Corp and take the subsidy as a tax credit when I file my 2022 taxes.

Assuming the latter - that I pay the full premium through my S-Corp each month - will the S-Corp be able to take the $18K deduction ($1,500 x 12 months) as it always has and then include the $18K on my 2022 W-2 allowing me to take the $18K as a deduction on line 10a of my 1040? 

Any insight as to taking this approach instead of applying the tax credit each month in advance would be appreciated.

[Critter-3 · Accepted solution]

First your corp has not been deducting the insurance premiums on their return but have been increasing the wages  expenses by that amount (which gets you the same deduction ... but the wording is more correct this way)  ... so in actuality you have been paying fed/state/FICA taxes on this benefit via payroll and getting an adjustment to income on the personal return.

Now you can continue this like you always have but the only difference will be the adjustment on the 1040 ... it will be reduced to reflect the credit taken in advance or on the return  ... only the out of pocket amount will be an adjustment on the personal return.   If I were you I'd reduce the payroll to only cover the out of pocket amount if you were to take the advance PTC.