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Can I deduct my health insurance premium, for myself and family, from my S-corp (IRS form 1120S) before transfer of shareholder distribution (K-1) to me personally?

And, must I pay myself a payroll, to allow this deduction?

Presently, there is no payroll, and I am soul owner of the S-corp. I'm a software consultant.

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  • You need an accountant ASAP. S-Corp with profits and no payroll is just asking to be audited.
    – TTT
    Commented Apr 25, 2016 at 18:11

2 Answers 2

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You are going to need professional advice on how to proceed.

Yes, you should be paying yourself a salary. But you need to be aware that, as an owner of an S-corp, there are different rules that apply to your health insurance than there would be for your employees. Generally, the owner's health insurance premiums need to be included in the Box 1 of his W-2, and he can then deduct the premiums using the self-employed health insurance deduction on his 1040. Other employees will not have the premiums included on the W-2, and won't need to do anything special on their 1040.

But again, there are more details here that are needed, and you need to seek professional help.

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Can I deduct my health insurance premium

Employer-sponsored coverage is an expense for the employer, so yes.

And, must I pay myself a payroll, to allow this deduction?

Obviously.

Presently, there is no payroll

You're breaking the law. You must have payroll and pay yourself a reasonable salary.

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  • It's not likely he could secure proper "employer sponsored" coverage with a single employee. Generally you need a quarterly wage report indicating at least two full time employees. Many states have laws specifically prohibiting a business from expensing individual health coverage.
    – quid
    Commented Apr 25, 2016 at 16:57

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