Affordable Care Act regulations

[equinecpa]

Is there anything specific that you want to know?

Are there any employees BESIDES >2% Shareholders?

In one case yes one employee and one shareholder-only shareholder is covered by health insurance.

In another husband and wife, wife is shareholder, husband works for the business and will receive w-2. Would health insurance coverage for husband be deductible?

[TaxGuyBill]

Both of those situations are okay with ACA. The second one is only okay because the husband is a "constructive" >2% owner. If a regular non-shareholder employee was reimbursed for insurance, it would not work.


The insurance cost can be paid directly by the corporation or the taxpayer can pay it and the corporation reimburses them. That amount is added to box 1 of their W-2 (so the corporation will deduct it as wages).

The shareholder can deduct it as a Self Employed Health Insurance Deduction on Line 29 of the 1040 (assuming they have wages from the corporation besides the health insurance).

If the husband (non-shareholder) has separate insurance from his wife (shareholder) and is paid from the corporation for it, it is still added to box 1 of his W-2 because of constructive ownership. However, the SEHI deduction is a little questionable. A clearer way would be for the corporation to reimburse the wife for her spouse's insurance (the non-shareholder husband), and then it would definitely qualify for the SEHI deduction.

[equinecpa]

In one case yes one employee and one shareholder-only shareholder is covered by health insurance.

This one is OK? Perhaps I misled there are two employees (one a more than 2% shareholder, and then another employee)? I thought one couldn't pick and choose who is covered?

[TaxGuyBill]

I think it is okay.

It is definitely okay with the ACA.

From what I read for the regular discrimination of Highly Compensated Employees under §105, the 'penalty' for that is adding it to the taxable wages of the Highly Compensated Employee. It may or may not fall under that (in my opinion, it would not). However, adding the health insurance to the taxable wages is already done for S-corporation shareholders, so even if would be classified as discrimination, nothing really changes.

[taxea]

https://www.healthcare.gov/small-businesses/