S Corp Health Insurance

[Unregistered]

For the 2% S Corp owner, health insurance premiums paid are treated as compensation on the 1120S and the W-2 (box 1 and box 14, but not FICA/Med taxable). The 2% owner can then deduct the premium on the 1040, line 29.

How about the 2% owner's kids? Constructive ownership rules (sec 318) means that premiums paid for kid-employees are treated as compensation--deduct on 1120S, add to box 1,14 on W-2.

Are the kids allowed to deduct the premiums on 1040, line 29?

[Bees Knees]

TTB page 13-25 says "a more than 2% shareholder of an S corporation also includes members of the shareholder's family, including a spouse, children, grandchildren, and parents."

In other words, if you are related to the 2% shareholder, you are treated as a 2% shareholder. Form 1040 instructions on page 30 for line 29 says the self-employed health insurance deduction applies if you received wages in 2005 from an S corporation in which you were a more than 2% shareholder.

Since a kid is treated as a more than 2% shareholder, he or she gets the line 29 deduction as a more than 2% shareholder.

[OldJack]

family plan health insurance

I agree with Bees Knees on 2% shareholder father. The kids W2 should reflect any insurance premiums paid for their separate health insurance policy cost. If their insurance is a part of the fathers family premiums the total premium amount is added to fathers W2.