If you’re an S Corp owner, you only have a few weeks left to grab a tax deduction that most business owners miss, and once the year closes, you can’t fix it.
This one move could save you real money on your taxes, but it has to be done before December 31.
To qualify for the health insurance deduction as an S Corp owner, two things must happen:
- Your S Corp must pay for your health insurance or reimburse you for it.
- That amount must show up on your W-2 in Box 1 (not Boxes 3 or 5).
When both steps are done correctly, you get to deduct your health insurance on your personal tax return. This lowers your taxable income and helps you keep more of what you earn.
If you skip these steps? You lose the deduction, and your health insurance becomes an itemized deduction, which rarely saves new business owners anything.
If you own more than 2% of the S Corp and don’t have health insurance through another job, you can claim this as “self-employed health insurance”, but only if the S Corp runs it through the business correctly.
One warning: S Corps can reimburse the owner without issues, but you can’t reimburse regular employees unless you use an approved plan like QSEHRA or ICHRA. Otherwise, the IRS can hit you with a $100-per-day penalty per employee.
This is an easy win, but only if you act now.
If you want help getting this set up the right way before the deadline, reach out. I’ve got you.