Can an S Corp reimburse a non shareholder adult child employee of the biz for their health ins premiums under attribution and the child deduct the cost as S/E insurance?

Forum|Forum|6 years ago
December 7, 2019
3 replies
32 views

The business does have other employees and no group insurance plan. So, would the child get a S/E health insurance deduction on their 1040?

Lacerte Tax

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Best answer by PhoebeRoberts

Assuming there's a plan whereby the S-corp routinely reimburses health insurance premiums for employees (possibly for certain classes of employees, but "the shareholder's adult kid" doesn't constitute a class), then yes, the premium reimbursement would be treated as SE health, includable in Box 1 but not 3 or 5, and deductible at the 1040 level under the deemed shareholder rules.

If no plan, it's still deductible by the employer, goes in Boxes 1, 3, and 5, and arguably is not deductible at the 1040 level due to lack of plan.

PhoebeRoberts

Answer

Intuit Community Champion

Assuming there's a plan whereby the S-corp routinely reimburses health insurance premiums for employees (possibly for certain classes of employees, but "the shareholder's adult kid" doesn't constitute a class), then yes, the premium reimbursement would be treated as SE health, includable in Box 1 but not 3 or 5, and deductible at the 1040 level under the deemed shareholder rules.

If no plan, it's still deductible by the employer, goes in Boxes 1, 3, and 5, and arguably is not deductible at the 1040 level due to lack of plan.

qbteachmt

Level 15

I have a different perspective.

A non-shareholder employee is not Self-employed. A non-shareholder employee is just an employee, period. Being an Adult, has no bearing. Being the Child of a shareholder of that employer, has no bearing.

Reimbursing this person for their own costs for health insurance is a Taxable benefit, as a Bonus, justified in the amount as against the cost. Getting this as a credit or deduction on the 1040, not a Sched C, is not related to anything "Self-employed."

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PhoebeRoberts

Intuit Community Champion

The Internal Revenue Code disagrees with your perspective, alas. A child (or grandchild, or child-in-law!) of an S-corp shareholder is a deemed shareholder, and not just an employee, and subject to exactly the same tax treatment as an owner.

qbteachmt

Level 15

I always search the web for recent, timely, blog posts on the topic, since the rules keep getting modified, re-interpreted, etc. Here's one that seems easy to understand:

https://www.peoplekeep.com/blog/health-insurance-reimbursement-in-2019-what-are-the-options

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