Here’s the latest update on health insurance developments for S corporation owners in 2023. As an S corporation owner with over 2% ownership, you can expect some positive news regarding your health insurance.
To ensure that you comply with the Affordable Care Act (ACA) regulations and avoid the $100-a-day penalties, follow these steps:
- Pay for the health insurance directly or through reimbursement and include it in the S corporation’s records.
- Make sure that the S corporation includes the health insurance premiums on your W-2 form as additional compensation in box 1, but not in boxes 3 or 5.
- If you’re an owner-employee with over 2% ownership, claim the health insurance deduction as “self-employed health insurance” on line 17 of Schedule 1 of Form 1040, but make sure you meet the two requirements of not having access to employer-subsidized health insurance and having sufficient salary.
For regular employees, S corporations aren’t required to provide health insurance benefits. However, if they do, they must use an acceptable ACA plan, such as the qualified small employer health reimbursement arrangement (QSEHRA) or individual coverage HRA (ICHRA).
The S corporation can reimburse more-than-2-percent owners for individually purchased insurance without any penalties. Still, if it reimburses regular employees without using the QSEHRA or ICHRA, it faces the $100-a-day penalty per employee.
If you plan to provide health benefits to employees through the S corporation, several tax-advantaged options are available. If the S corporation provides group health insurance to all employees, including the shareholder-employee, the same rules apply.
If you need any help regarding these issues Corridor Consulting would love to help, please schedule a discovery session here, and we’ll be able to address these issues and much more! We’re looking forward to opening many more doors for you!
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This article is not professional tax or legal advice for your specific circumstances. Consult with your professional adviser to better understand how these items may impact you, or how they’ve changed
