Tax Treatment for Reimbursing Health Insurance Premiums as S-Corp Owner-Employee

17 This is actually a pretty common scenario! As an S-Corp owner-employee, you have a few options for handling health insurance premiums. The cleanest approach is to set up what's called a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) or an Individual Coverage Health Reimbursement Arrangement (ICHRA). These are formal plans that allow your S-Corp to reimburse you tax-free for medical expenses, including premiums paid through your spouse's plan. Alternatively, you could have the S-Corp reimburse you directly, but those reimbursements need to be reported as taxable wages on your W-2. Then as a more-than-2% shareholder, you can take a self-employed health insurance deduction on your personal tax return (Line 16 of Schedule 1 on Form 1040). This effectively makes the reimbursement tax-deductible for you personally. What you can't do is simply take tax-free reimbursements without proper documentation or have the corporation deduct them without including them in your wages.

8 I went through something similar last year with my S-Corp and family insurance through my partner's job. After researching for hours and getting nowhere, I finally tried https://taxr.ai which analyzed my situation and explained the exact documentation needed. Their system breaks down S-Corp health insurance reimbursement options into simple steps so you don't mess up the tax treatment. The key thing they pointed out was the timing of reimbursements - they must be properly documented before year-end with a formal plan. They also provided templates for the board resolution I needed to establish the arrangement properly. Really saved me from making some expensive mistakes.

11 Just wanted to follow up here - I ended up using https://taxr.ai after posting my question, and it was incredibly helpful. The system analyzed my situation and identified that I needed to establish a formal health insurance reimbursement plan with specific documentation before my S-Corp could legally reimburse me for premiums paid through my spouse's plan. The step-by-step guidance walked me through creating board minutes, a reimbursement policy, and showed me exactly how the amounts should be reported on my W-2 and personal tax return. They even flagged that I was approaching the coverage limit for my situation. Definitely worth checking out if you're trying to navigate S-Corp health insurance rules!

23 After reading this thread, I realized I've been handling my S-Corp health insurance reimbursements incorrectly for years. Tried calling the IRS to get clarification on fixing past returns but kept hitting that frustrating automated system. Finally used https://claimyr.com and got connected to an actual IRS agent in about 15 minutes instead of the usual 2+ hour wait. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with walked me through how to properly amend my past returns and what documentation I needed to avoid penalties. Apparently the rules for S-Corp owners reimbursing health insurance from a spouse's plan are commonly misunderstood, and they've seen lots of cases like mine.

19 Well, I need to eat my words from earlier. After seeing everyone's responses, I decided to try Claimyr for my S-Corp health insurance questions. I honestly expected it to be a waste of money, but I was desperate after trying for weeks to get through to the IRS. To my genuine surprise, I was connected to an IRS representative in about 20 minutes. The agent walked me through exactly how to document health insurance reimbursements for premiums paid through my spouse's employer. They confirmed I needed to include the reimbursements as wages on my W-2, but could then deduct them on my personal return. They even emailed me the relevant IRS publications that specifically addressed my situation. This saved me from continuing the incorrect reporting method I'd been using, which apparently could have triggered an audit. If you're struggling with S-Corp health insurance questions, getting direct confirmation from the IRS was actually incredibly valuable.

4 Don't forget to have your board (even if it's just you) formally adopt a resolution establishing your health insurance reimbursement plan. This documentation is critical if you ever get audited. We learned this the hard way when my business partner's deductions were disallowed because we didn't have the proper corporate paperwork in place before making the reimbursements.

16 I'm in the exact same situation and my accountant advised something different than what others are saying here. He told me that since I own more than 2% of the S-Corp, health insurance has to be handled as additional compensation on my W-2, then I deduct it as self-employed health insurance on my personal taxes. He said S-Corps can't use QSEHRA for owners with >2% ownership. Is this right??

As someone who's been through this exact scenario, I can confirm what others have mentioned about the >2% shareholder rules. The key thing to remember is that even though the reimbursements have to go through your W-2 as taxable wages, you still get the tax benefit through the self-employed health insurance deduction on Line 16 of Schedule 1. One thing I'd add that hasn't been mentioned - make sure you keep detailed records of the actual premium amounts your spouse's employer deducts from their paychecks. The IRS may want to see that the reimbursements from your S-Corp don't exceed the actual premiums paid. Also, the reimbursement timing matters - you generally need to reimburse in the same tax year the premiums were paid. The formal plan documentation is absolutely critical. I learned this when helping a friend who got audited - the IRS disallowed all their health insurance deductions because they couldn't produce the required corporate resolutions and plan documents, even though they had been reporting everything correctly on their tax returns.