For the W2 employees and perhaps for dedicated 1099 contractors of an S Corporation the employer paying for or towards these employee's coverage is quite straight forward. From a tax and accounting perspective its gets more complicated for persons who are more than 2% eligible shareholders in the company.
The bottom line is that company paid insurance premiums for more than a 2% shareholder must be treated as wages to that owner/shareholder. So, the only way the S-Corp can deduct the amount it pays towards owner health insurance as a business expense is by including it as part of the shareholder's salary. Owner(s) health insurance costs can no longer be declared as an insurance expense or employee benefit expense on the S-Corp's taxes.
The effect on the S-Corp's net income is the same, but this does result in an increase in net taxable income for the owner(s)/shareholder(s). It is possible that the owner/shareholder will recapture some of this by deducting it from their Adjusted Gross Income on their Form 1040. However, the situation can be further complicated by various state laws that may not allow for a one-person corporation to purchase health insurance for the owner and effectively forcing them to purchase individual health insurance coverage that they pay for themselves.
And, just to make things even more complicated, if the owner/shareholder or their spouse is eligible to participate in any other subsidized health plan they can't take the deduction from Adjusted Gross Income (AGI) on their 1040 for medical insurance premiums paid for by the S-Corp.
So the answer to your question is sometimes "Yes" and sometimes "No" because a variety of circumstances can influence the answer. My advice is to seek out an experienced health insurance broker who can determine your specific circumstances and advise you on how to approach them.
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The bottom line is that company paid insurance premiums for more than a 2% shareholder must be treated as wages to that owner/shareholder. So, the only way the S-Corp can deduct the amount it pays towards owner health insurance as a business expense is by including it as part of the shareholder's salary. Owner(s) health insurance costs can no longer be declared as an insurance expense or employee benefit expense on the S-Corp's taxes.
The effect on the S-Corp's net income is the same, but this does result in an increase in net taxable income for the owner(s)/shareholder(s). It is possible that the owner/shareholder will recapture some of this by deducting it from their Adjusted Gross Income on their Form 1040. However, the situation can be further complicated by various state laws that may not allow for a one-person corporation to purchase health insurance for the owner and effectively forcing them to purchase individual health insurance coverage that they pay for themselves.
And, just to make things even more complicated, if the owner/shareholder or their spouse is eligible to participate in any other subsidized health plan they can't take the deduction from Adjusted Gross Income (AGI) on their 1040 for medical insurance premiums paid for by the S-Corp.
So the answer to your question is sometimes "Yes" and sometimes "No" because a variety of circumstances can influence the answer. My advice is to seek out an experienced health insurance broker who can determine your specific circumstances and advise you on how to approach them.