By If you own more than 2 percent of an S corporation, your dental, vision, and Medicare premiums can qualify for the same valuable tax treatment as your major medical insurance premiums.
To secure the deductions, follow the same three-step process for all qualifying premiums.
First, your S corporation must either pay the premiums directly or reimburse you after you provide proof of payment. Second, the corporation must include the premiums in box 1 of your Form W-2, but not in box 3 or 5. Third, you claim the combined medical, dental, vision, and qualifying Medicare premiums as the self-employed health insurance deduction on your individual tax return.
Qualifying Medicare costs can include Part B, Part D, Medicare Advantage, Medigap, and certain voluntarily paid Part A premiums. Even when Social Security deducts Medicare premiums directly from your benefits, your corporation can reimburse you if you provide documentation, such as your Form SSA-1099 or Medicare statement.
Two important limitations apply.
You generally cannot claim the deduction for any month when you or your spouse qualified for subsidized health coverage through another employer. In addition, your total deduction cannot exceed your box 5 Medicare wages from the S corporation. Therefore, your salary should be high enough to cover the combined amount of all medical, dental, vision, and Medicare premiums.
Qualifying premiums paid for relatives who work for the corporation may require the same W-2 treatment. The family attribution rules can apply even when those relatives own no stock directly.
If you want to discuss S corporation health insurance and Medicare premium deductions, please call me on my direct line at 408-778-9651