cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Level 1

My single owner Scorp company paid my health insurance premiums but I did not add to my W-2 wages. Should I add that amount to distributions or to my wages? Thanks

 
1 Best answer

Accepted Solutions
Level 1

My single owner Scorp company paid my health insurance premiums but I did not add to my W-2 wages. Should I add that amount to distributions or to my wages? Thanks

If your S-corp paid your health insurance premiums, you should include this total (annual) amount in Box 1 of your W-2 (but not Boxes 3 or 5).  That will record the health insurance as a deductible compensation expense for your S-corp on its Form 1120S (and as taxable wage income to you, on your personal Form 1040 tax return).  You will then be further eligible to take a self-employed health insurance deduction on your Form 1040 . . . thus eliminating the extra taxation to you individually, that was created by reporting the extra W-2 Box 1 wage income.

For more information on this, as well as a formal discussion, please refer to the following IRS.gov webpage:

https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical...


In particular, you may find the sections titled "Treating Medical Insurance Premiums as Wages" and "Health Insurance Purchased in Name of Shareholder" especially relevant.

For mechanical instructions on how to take the self-employed health insurance deduction for 2% + S-corp shareholders in TurboTax, you can refer to the details and steps found here:

https://ttlc.intuit.com/questions/2966948-s-corp-self-employed-health-insurance-deduction


Thank you for asking this important question.

View solution in original post

9 Replies
Level 1

My single owner Scorp company paid my health insurance premiums but I did not add to my W-2 wages. Should I add that amount to distributions or to my wages? Thanks

If your S-corp paid your health insurance premiums, you should include this total (annual) amount in Box 1 of your W-2 (but not Boxes 3 or 5).  That will record the health insurance as a deductible compensation expense for your S-corp on its Form 1120S (and as taxable wage income to you, on your personal Form 1040 tax return).  You will then be further eligible to take a self-employed health insurance deduction on your Form 1040 . . . thus eliminating the extra taxation to you individually, that was created by reporting the extra W-2 Box 1 wage income.

For more information on this, as well as a formal discussion, please refer to the following IRS.gov webpage:

https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical...


In particular, you may find the sections titled "Treating Medical Insurance Premiums as Wages" and "Health Insurance Purchased in Name of Shareholder" especially relevant.

For mechanical instructions on how to take the self-employed health insurance deduction for 2% + S-corp shareholders in TurboTax, you can refer to the details and steps found here:

https://ttlc.intuit.com/questions/2966948-s-corp-self-employed-health-insurance-deduction


Thank you for asking this important question.

View solution in original post

Level 1

My single owner Scorp company paid my health insurance premiums but I did not add to my W-2 wages. Should I add that amount to distributions or to my wages? Thanks

Very helpful! Thank you Geoffrey!
Level 1

My single owner Scorp company paid my health insurance premiums but I did not add to my W-2 wages. Should I add that amount to distributions or to my wages? Thanks

aca affect scorp
Level 1

My single owner Scorp company paid my health insurance premiums but I did not add to my W-2 wages. Should I add that amount to distributions or to my wages? Thanks

Hello again, davidsimshomes:

Thank you for your kind words.  Yes, the Affordable Care Act (a.k.a. Obamacare) can affect your tax return, where the taxpayer both claims the self-employed health insurance deduction, and is eligible for an ACA health insurance premium credit.

A full discussion of this is topic is beyond the scope of this answer, and the space allowed for doing so (although I do indicate below where you can in fact read such a complete discussion).

The main problem you see is that a taxpayer's ACA premium tax credit (a separate and additional tax benefit, calculated on IRS Form 8962) is based on the amount of your Adjusted Gross Income.  However, your Adjusted Gross Income is itself determined, in part, by the amount of your ACA tax credit.  Thus, there is a circular reference here, and a significant mathematical issue as a result.

The IRS itself recognized this as one of the inherent flaws (or inconsistencies) in the way that the ACA was written into law, and so in 2014 they issued formal taxpayer guidance on the matter, called Revenue Procedure 2014-41 (or Rev. Proc. 2014-41).

An excellent analysis of all this, as well as a complete answer to the question (with all of the nuances and details) of how the ACA affects the self-employed health deduction, is provided at the following (3) internet links:

<a rel="nofollow" target="_blank" href="https://www.healthinsurance.org/obamacare/self-employed-health-insurance-deduction/">https://www.hea...>

<a rel="nofollow" target="_blank" href="https://www.healthinsurance.org/faqs/my-premium-subsidy-is-dependent-on-my-agi-but-im-self-employed-...>

<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-drop/rp-14-41.pdf">https://www.irs.gov/pub/irs-drop/rp-14-41.pdf</a>

Hopefully this additional information is helpful to you, and thanks again for a good question.
Level 1

My single owner Scorp company paid my health insurance premiums but I did not add to my W-2 wages. Should I add that amount to distributions or to my wages? Thanks

Hi Geoffrey or any TurboTax guru. When putting my S corp owner company paid health insurance premiums in box 1 of my W-2, should this amount also be in box 16 for state wages? Thanks much!
Level 1

My single owner Scorp company paid my health insurance premiums but I did not add to my W-2 wages. Should I add that amount to distributions or to my wages? Thanks

Hello davidsimshomes:

The answer to your question is "yes."  If you are reporting taxable wage income in Box 1 (federal) of your W-2, then those same wages are taxable as well by the state in which they were earned.  Thus, you would want to input those wages in Box 16 of your W-2 as well.  The only exception to this would be if your S-Corp "employed" you in multiple states, in which case you could have more than one state applicable in W-2 Boxes 15, 16, and 17 -- subject to the mathematical constraint that the sum of Boxes 16 (states) should "add up" to Box 1 (federal) of the W-2.

Regards.
Level 1

My single owner Scorp company paid my health insurance premiums but I did not add to my W-2 wages. Should I add that amount to distributions or to my wages? Thanks

For a S-corp member to be able to deduct health insurance premiums on line 29 of your 1040, your Medicare wages (box 5 of W-2) must equal or exceed your total health insurance premiums for the year.  Your W-2 box 1 is not the limiting factor on whether your health insurance can be deducted on the first page of your 1040.  The Form 1040, line 29 health insurance deduction is limited by your Medicare wages.  You can deduct health insurance premiums up to the amount you have in box 5.  If your box 5 wages don't cover all your health insurance premiums, you can still deduct the balance of your health insurance cost amount on Sched A, but only the portion that exceeds 10% of your income....but that's not nearly as sweet as a line 29 deduction.
Level 12

My single owner Scorp company paid my health insurance premiums but I did not add to my W-2 wages. Should I add that amount to distributions or to my wages? Thanks

@simplemark1   Health insurance does NOT go in Box 5.  Because Box 5 is the limiting factor, that essentially means you have to have at least that much of wages, besides what was added for health insurance.
Level 1

My single owner Scorp company paid my health insurance premiums but I did not add to my W-2 wages. Should I add that amount to distributions or to my wages? Thanks

As I say in my answer above, "your Medicare wages (box 5 of W-2) must equal or exceed your total health insurance premiums for the year"  and "Line 29 health insurance deduction is limited by your Medicare wages".  I'm not saying to put your health insurance in box 5, I'm saying that box 5 wages is the limiting factor in whether you can deduct health insurance on line 29 of your 1040.