s-corp and health premium

[Earl]

S-corp owner gets W-2 wages of $100,000. There are health premiums paid of $10,000 that are added on to his income on the W-2.

The extra $10,000 is subject to income tax but not SS Taxes? (Is that backward?)

Is plan comp $100,000 or $110,000?

Thanks (At least its not a K-1 question)

[Lori Friedman]

The benefits are included in the taxable compensation of a more-than-2% shareholder-employee, but they aren't subject to Social Security and Medicare taxation if they're made under a plan for employees and their dependents. There's a very helpful discussion in Announcement 92-16, 1992-5 IRB 53.

[Guest mjb]

For most S corp owners inclusion of the health ins premium on the W-2 is a wash because the employee can deduct the amount of the health ins premium on line 29 of the 1040 which eliminates both regular as well as AMT tax.

[namealreadyinuse]

Plan comp = it depends on the terms of the plan. The general W-2 definition would be $110K

[GBurns]

An affected S Corp shareholder MAY/MIGHT be able to deduct some or all of the premium that was included on the W-2 depending on the particular facts and circumstances.