Discussion:S-E health insurance deduction for S corp SH
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| + | {{ForumReplyPost|UserID=Cpasupport|Date=16 November 2005|Text=My question/response is a twist. If you do treat it as includable on your wages and then write-off the SEHI deduction on page one of your personal tax return, does the 15.3% FICA/MC apply to the increased wages? Sincerely, Ed}} | ||
Revision as of 21:16, 16 November 2005
Discussion Forum Index --> Tax Questions --> S-E health insurance deduction for S corp SH
| 11 November 2005 | |
| This is often handled in different ways and, though very conservative, I do not take this deduction on page one unless the policy is in the corporation's name. I have read several different places that this is the correct way to handle it, yet just about everyone I have questioned either doesn't ask the SH or deducts it regardless. It's so confusing because for the policy to be 'in the corporation's name', I believe would necessitate a group policy, which is not always available for a sole shareholder and usually not viable. I'd love to get some feedback on how others are handling this. The tough part is, I formed my own S corp in 2004, have an individual policy, didn't need the deduction in 2004 due to first year loss, but sure hate to lose a $3,000 to $4,000 deduction by taking it on Schedule A. | |
Lsmith32935 (talk|edits) said: | 15 November 2005 |
| Disregarding policy ownership, health insurance premiums paid for by the corporation (S) is reported as payroll and the total of these are included W2 at year end. (2% or greater stockholder). | |
| 16 November 2005 | |
| Your comment "disregarding policy ownership" is the main question and concern I have. If the policy is 'owned' by the S corp, there is little question as to the proper handling of this by both the business and the shareholder. Therefore, policy ownership is the question. The following is from Pub 525:
You may be able to deduct 100% of the amount paid for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents if you are one of the following: A shareholder owning more than 2% of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2. The insurance plan must be established under your business. *** You may be allowed this deduction whether you paid the premiums yourself or your partnership or S corporation paid them and you included the premium amounts in your gross income. Take the deduction on line 31 of Form 1040. The sentence "The insurance plan must be established under your business" is the catch-phrase; however, the *** comment then makes it confusing. Here’s what I think this is saying (and what I’ve told my clients): 1. The plan must be established under the business. 2. The S corp can pay the premiums but must include them in your income (wages or, as I've also seen done, as Other Income on Line 21 of the 1040). 3. You can pay them yourself, but will still not be able to take a SEHI deduction UNLESS the plan is established under the business. The more I write the more confused I get. Until someone can cite that the plan does NOT have to be 'established under the business' then I'm not taking the SEHI deduction on Page 1. | |
Cpasupport (talk|edits) said: | 16 November 2005 |
| My question/response is a twist. If you do treat it as includable on your wages and then write-off the SEHI deduction on page one of your personal tax return, does the 15.3% FICA/MC apply to the increased wages? Sincerely, Ed | |
