Can my S Corp pay my Medicare premiums?
Asked by: Dawson Osinski | Last update: November 22, 2025Score: 4.2/5 (64 votes)
Can a S Corp pay health insurance premiums for owners?
The bottom line is that in order for a shareholder to claim an above-the-line deduction, the health insurance premiums must ultimately be paid by the S corporation and must be reported as taxable compensation in the shareholder's W-2.
Can my business pay my Medicare premiums?
If You Are an S Corporation Shareholder-Employee
You can pay the premiums yourself, or the S corporation can pay them and report the premium amounts on your Form W-2 as additional taxable wages.
Does S Corp pay Social Security and Medicare?
After your first $160,200, you will not be subject to Social Security but will still have to pay 2.9% for Medicare taxes. If you form an S Corp, you typically pay yourself reasonable compensation, which is subject to FICA taxes, including Social Security and Medicare taxes.
Can you write off Medicare premiums?
Yes, Medicare premiums are tax deductible as a medical expense as long as you meet two requirements. First, you must itemize your deductions on your tax return to deduct them from your taxable income. Second, only medical expenses that exceed 7.5% of your adjusted gross income (AGI) are deductible.
An S Corporation Can Pay Your Health Insurance
Can I reimburse myself for Medicare premiums?
Even if you have your Medicare premiums paid directly out of your Social Security benefits, you can withdraw money tax-free from your HSA to reimburse yourself for those expenses.
Can health care premiums be deducted on taxes?
You can include health insurance premiums in your medical expense calculations. However, certain premiums are not eligible for medical expense deductions. You cannot include the following premiums in your tax deductions: Life insurance policies.
Can I deduct Medicare premiums on S Corp?
If you've established your business as an S corporation, the corporation can either pay your Medicare premiums directly on your behalf (and count them as a business expense) or the corporation can reimburse you for the premiums, with the amount included in your gross wages reported on your W2, and you can then deduct ...
What is the 60/40 rule for S Corp?
The 60/40 rule is a simple approach that helps S corporation owners determine a reasonable salary for themselves. Using this formula, they divide their business income into two parts, with 60% designated as salary and 40% paid as shareholder distributions.
How much can an S Corp write off?
Like LLCs, eligible S corps can take the QBI deduction (Section 199A), which can amount to as much as 20% of a business's total taxable income and can be taken in addition to standard and itemized deductions.
Can my company pay my Medicare?
Can my employer pay my Medicare premiums? Employers can't pay employees' Medicare premiums directly. However, they can designate funds for workers to apply for health insurance coverage and premium payments with a Section 105 plan.
What is reasonable compensation for a S Corp owner?
You may or may not have heard of the S Corp Salary 60/40 rule. The guideline encourages setting reasonable compensation between 60% and 40% of the business's net profits. The IRS does not set this guideline. It should not be relied on as the only factor for deciding S corporation reasonable compensation.
Can S Corp owners deduct life insurance premiums?
Life insurance premiums are only deductible if the S corporation offers life insurance as an employee benefit.
Can S Corp pay out of pocket medical expenses?
The IRS allows S-corporations to pay for (and deduct) the medical expenses of their shareholders, but only under certain stipulations. First, the employee or owner must be a more-than-two-percent shareholder of the corporation.
Can my small business pay for my health insurance?
Thankfully, federal law allows employers to reimburse employees for their monthly premiums for individual health insurance policies, as long as it's done through a compliant health reimbursement arrangement (HRA).
Can the owner of an S Corp have an HSA?
Owners of an S corporation cannot make pre-tax contributions to their HSAs through the company by salary reductions. Remember to designate a beneficiary when you set up your HSA. If your spouse is the beneficiary, it is treated as your spouse's HSA after your death.
What is the 5 year rule for S Corp?
S Corps that lose their “S” status must typically wait five years before being able to re-elect it.
What is the 2% rule for S Corp?
Some unique income tax rules apply to S corporations regarding compensation and fringe benefits paid to shareholders who own greater than 2% of the corporation. Under these S corp income tax rules, a greater than 2% shareholder is taxed as a partner in a partnership for fringe benefits received.
What income makes an S Corp worth it?
You need to earn at least $40,000 in profit for an S Corp to make sense, though. Otherwise, the costs of forming and running it exceeds the benefits of an S Corp. Here are some charts that show the tax savings for businesses with $40,000, $80,000, and $100,000 in profit.
Can a S Corp pay health insurance premiums for owners only?
In short, you can ensure you don't incur the cost of those additional payroll taxes if you offer insurance to all employees. If your S Corp only provides insurance for owners, the premiums are subject to both income and payroll taxes.
Do you pay Medicare tax on S Corp income?
Payroll taxes, which include Social Security and Medicare taxes, must be paid on this salary, which total of 15.3% of your wages (yup that's the same amount as self-employment tax).
Can I deduct my Medicare premiums if I am self-employed?
If you're self-employed and your business shows a profit you can claim your health insurance premiums as a tax deduction. This includes premiums for Medicare Parts A and B, Medicare Advantage, Part D prescription drug plans and Medicare Supplement plans .
How much can self-employed deduct from health insurance?
Through this deduction, self-employed workers who have a net profit for the year can write off 100 percent of their health insurance premium. They can also deduct premium costs for any spouse or dependents. Keep in mind, though, the deduction is limited to how much you pay out of your own pocket.
Can AC Corp pay health insurance premiums for owners only?
If you own a C-Corp, things are a bit simpler since the income doesn't flow through directly to you. A C-Corp can just cover or reimburse health insurance premiums without any fuss. As an owner-employee, you don't have to worry about extra steps on your personal income taxes.
Is it worth claiming medical expenses on taxes?
The medical expense deduction covers a wide variety of expenses. However, because of the high Standard Deduction and the 7.5% of AGI threshold requirement, it can be difficult to benefit unless you have a lot of out-of-pocket costs.