United Benefit Advisors Insight and Analysis Blog

IRS Releases Memo on 2-percent Shareholders’ Health Coverage Deductions

By Karen Hsu, Director of Compliance at United Benefit Advisors
  Jul 18, 2019 1:12:55 PM

shutterstock_1021932094The Internal Revenue Service (IRS) released a memorandum to confirm that a person who is a 2-percent shareholder (through Internal Revenue Code §318’s attribution rules) in an S corporation is entitled to a deduction for the amounts paid by the S corporation under a group health plan.

For the 2-percent shareholder to deduct the health insurance premium amounts, the S corporation must report the health insurance premiums paid or reimbursed as wages on the 2-percent shareholder’s Form W-2 in that same year. Also, the shareholder must report the premium payments or reimbursements from the S corporation as gross income on the Form 1040, U.S. Individual Tax Return.

Topics: IRS, Group health plans, Internal Revenue Service