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Can I deduct health insurance premiums as an S Corporation shareholder?

by TurboTax Updated 4 months ago

You may be able to use the Self-Employed Health Insurance (SEHI) deduction if you're at least a 2% shareholder in an S Corporation. 

To claim this deduction, the health insurance premiums must be paid or reimbursed by the S corporation and reported as taxable compensation in box 1 of your W-2.

The S Corporation can either purchase the policy in your name or reimburse you for the premiums you paid. The policy can also cover your spouse, dependents, and any nondependent children under the age of 27.

Claiming the SEHI deduction is generally more advantageous than claiming an itemized deduction. 

The SEHI deduction will appear on line 17 of Schedule 1 of your federal income tax return, Form 1040 (as part of Line 10), and is limited to the amount in Box 5 (FICA wages by the corporation) of your W-2.

To claim the SEHI deduction in TurboTax, you will need your W-2 and the K-1 that the S corporation sent to you.

Here's how to enter it in TurboTax and claim the deduction:

  1. With your return open in TurboTax, search for K-1 and select the Jump to link.
  2. Select Yes to the question Did you receive any Schedules K-1 or Q?
  3. Select Start or Update next to S corporations (Form 1120S) and follow the prompts, filling out your information as you go.
  4. On the screen that says Check boxes that have an amount or are checked on the form, select Box 17 Info and any other boxes that contain info on your K-1.
  5. Select Continue.
  6. Continue to enter information from your K-1.
  7. On the Other Situations screen, select I personally paid health insurance and then select Continue.
  8. On the Self-Employed Health Insurance screen, fill in the W-2 box 5 amount and the amount of health insurance premiums you paid (this may be on your W-2 in box 14).
    • If you purchased insurance through Healthcare.gov or your state marketplace, leave the second box blank.
  9. Select Continue.
  10. On the Long-Term Care Insurance screen, enter any long-term care premiums and select Continue.
  11. Select Yes or No to the question Does your K-1 have a code V in Box 17?.
  12. If you selected Yes, follow the screens until you reach the S corporation K-1 Summary screen.

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