Our company is an S Corp, and I believe there are special rules for them. I own 100% of the company and my wife works for the company. The company is going to contribute 50% to the premium for my policy and all of our employees. Will this 50% contribution be deducted as a business expense for the policies for my wife and I, or will the deduction be disallowed? If yes, I’m thinking I could pay our premium from our Health Savings Account to purchase with pre-tax dollars. Do you know?

I have included a link below that answers this question thoroughly but here’s the short answer. You can deduct the age-based premium for yourself and your wife on Line 29 of Form 1040, which is where you deduct your health insurance.  The only difference is that health insurance is 100% deductible and LTCI goes by the age-based amounts that generally grow each January. However, just like the health insurance, these age-based amounts will be added back to your income since you are a greater than 2% owner of an S-Corp.  This is good for your personal cash flow though as the premium is paid from the business checking account, not your personal checking account. So having said that, you may prefer to pay the age-based amounts out of your Health Savings Account so they will be truly paid with pre-tax dollars and not added back to your income. You are fortunate to have this choice. This is one of the many reasons I’m a big fan of health savings accounts. Of course, you should confirm this information with your accountant.

Here is the link to the more detailed explanation.

So the 50% contribution is irrelevant for owners of an S-Corp. You can deduct the entire age-based amount for you and your wife as a self-employed health insurance expense, or you can pay the age-based amount out of your health savings account for each of you with pre-tax dollars.  Please note that the age-based amounts for 2012 and 2013 are in the above article so you can see approximately how much they change each year. As the amounts grow and as you and wife grow older, eventually you will be able to deduct/pay 100% of your premium through either one of these methods if you can’t already.



Posted in: Employer