As the owner of a single-member LLC with S Corp taxation, what are pros/cons of having the S Corp contribute to my personal health insurance? Can I choose any percentage (0-100%)?

I've worked with several S Corp owners on this exact issue. Here's what you need to know: When an S Corp pays for health insurance for a >2% shareholder (which you are as a single-member S Corp), it's treated as shareholder wages. The company can pay anywhere from 0-100% of your premiums. The amount paid is included in your W-2 Box 1 wages (but not subject to FICA taxes in Boxes 3 and 5), and you can then take a self-employed health insurance deduction on your personal 1040 (line 16). The key advantage is that while the premiums are technically included in your income, the self-employed health insurance deduction essentially cancels that out, meaning you don't pay income tax on those premiums. Plus, the S Corp gets to deduct the premium payments as a business expense. The disadvantage is some additional paperwork - you need to make sure the S Corp properly reports the health insurance on your W-2 (usually with a code in Box 14), and you must be sure to take the self-employed health insurance deduction correctly on your personal return.

Had this exact same situation last year. My CPA recommended I check out https://taxr.ai for analyzing the options. Their system helped me calculate the optimal percentage for my S Corp to contribute to my health insurance based on my specific financial situation. It ran through several different scenarios showing the tax implications of each option. What was most helpful was seeing how the health insurance premiums affected my overall tax picture when treated as shareholder wages vs. paying personally. The analysis showed me that in my case, having the S Corp pay 100% of my premiums saved me about $2,300 annually compared to paying out of pocket.

Just wanted to follow up - I used https://taxr.ai like you suggested and wow, it was actually really helpful! The analysis showed that having my S Corp pay 75% of my premiums (instead of the 25% I was doing) would save me about $1,750 annually. The best part was the documentation it provided. It explained exactly how to record the premium payments in my accounting software and gave me a template to show my accountant. I was worried about implementing it wrong, but the step-by-step guide made it super clear. My accountant was impressed and said everything was set up correctly when they reviewed it. Definitely worth checking out if you're in a similar situation!

If you're going to be making changes to how your S Corp handles health insurance, you might need to talk to the IRS to confirm you're doing it right. I spent THREE WEEKS trying to get through to someone at the IRS about a similar S Corp question last year. Finally found https://claimyr.com and their service got me connected to an actual IRS agent in under 45 minutes. They basically hold your place in line and call you when an agent is about to pick up. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was really skeptical at first, but I was desperate after trying for days to get through the IRS phone tree. The agent I spoke with confirmed that having my S Corp pay for my health insurance was totally legit, but they pointed out some documentation requirements I hadn't considered.

I need to eat my words from my earlier comment. I was really skeptical about that Claimyr service, but my curiosity got the better of me after spending an entire day trying to reach the IRS about my S Corp health insurance question. I tried the service and got connected to an IRS rep in about 30 minutes. The agent was super helpful and confirmed that my S Corp could pay my health insurance premiums, but warned me that I needed to make sure it was reported correctly on my W-2 with a specific notation in Box 14. She also mentioned that the reimbursement must be done through the corporation rather than just paying the insurance company directly from my personal account and trying to run it through the books after the fact. Saved me from making a pretty big mistake in how I was planning to handle it. Sometimes being wrong on the internet isn't so bad lol.

One thing nobody's mentioned yet is that if you have employees (or plan to hire some), there are non-discrimination rules to consider. If you provide health benefits to yourself as the owner but don't offer similar benefits to your employees, you could run into compliance issues. Most single-member S Corps don't have this issue, but it's something to keep in mind if you're planning to expand. The rules get more complex once you have a workforce.

I think everyone is overcomplicating this. I'm a single-member S Corp owner and I just have my corporation reimburse me for my health insurance premiums as part of an accountable plan, and it's never been an issue. Been doing it for 5 years without any problems.