2026 Health Insurance for S Corporation Owners

If you own more than 2 percent of an S corporation, the good news is that the rules for deducting your health insurance remain unchanged for 2026. By following a few important steps, you can continue to deduct the cost of coverage for yourself, your spouse, your dependents, and your children under age 27.

How the 2026 S Corporation Health Insurance Deduction Works

To qualify, your S corporation must either pay your health insurance premiums directly or reimburse you for them. The corporation must then include the premium amount as taxable wages in box 1 of your Form W-2, but not in boxes 3 or 5. You can then claim the self-employed health insurance deduction on your individual tax return if you meet the eligibility requirements.

Common Mistakes to Avoid

One of the most common mistakes involves compensation. Your deduction cannot exceed your box 5 Medicare wages. If you take little or no salary, you may lose part or all of the deduction, even though the premiums appear on your W-2. Another trap affects family members who work in the business. Under the tax law’s family attribution rules, certain relatives may be treated as shareholders even if they own no stock directly. This can change how their health insurance must be reported and deducted. Finally, be careful if you reimburse non-owner employees for individually purchased health insurance. Doing so outside an approved arrangement can trigger substantial IRS penalties.

How We Can Help

Sterling Tax and Accounting is here to help your business with tax planning!  Our comprehensive approach to tax planning helps reduce your overall tax liability and keep more money in your pocket.  If all your accountant does is file your taxes, chances are they are making you pay more than your fair share of taxes.

Learn how to proactively save on taxes by scheduling a call with our tax planning specialists. Our tax planning, accounting & business services help you stay on track. Sterling Tax & Accounting will work with you to optimize your business and minimize your taxes. We will work to provide you and your business with the tools and resources you need to build a solid tax and business foundation. We’re a trusted CPA Firm in Sarasota, Florida. We serve clients all over the US, and proactively work to minimize their taxes. Welcome to the Sterling Standard of business!  Want to learn more?  Schedule a meeting with our tax planning team.