S Corporation Shareholders Can Deduct Health Insurance Premiums

themselves, their spouses and their dependents if:

1. A two-percent or greater shareholder has earned income from the S corporation

exceeding the total of all premiums paid;

2. The shareholder is not eligible to participate in any subsidized health plan maintained

by the shareholder’s or a spouse’s employer;

3. The S corporation includes the premium cost in the shareholder’s Form W-2;

4. The shareholder includes the premium cost in gross income on Form 1040;

5. If the S Corporation reimburses the premiums, it must be in the same tax year.

Whether the policy is in the individual’s or S corporation’s name or who initially pays for the

premiums are not the determining factors.

Be sure and meet the above requirements in order to take the deductions as required by IRS Notice 2008-1.