While I can't recommend a specific health plan, I can tell you the general rule is that the health insurance of a greater-than-2-percent S corporation shareholder is a taxable fringe benefit. In other words, you can claim health insurance deductions for all your employees, but not for your own family at the corporate level. While this sounds unfair, it all washes out on your individual tax return.
Suppose you find an excellent health plan that runs you $1,000 a month for yourself and your dependents. This $1,000 is considered additional compensation to you on your Form W-2 and is included in wages in box 1, but excluded for Social Security and Medicare wages. In other words, you don't pay Social Security and Medicare taxes on the $1,000 a month, but technically you should have additional federal income tax withheld to cover the health insurance included in wages. Suppose your regular salary is $2,000 a month, so at the end of the year, the wages in box 1 on your Form W-2 is $36,000, which includes $12,000 in health insurance benefits.
When you prepare your corporate income tax return, you will claim a deduction for $36,000 in wages and nothing for health insurance. When you prepare your individual income tax return, you will include $36,000 in wages on line 7. You'll also complete the worksheet for line 29, and your result should be a deduction of $12,000 for self-employed health insurance deduction. Ignoring any other income and deductions, your net result for income on your individual return would then be $24,000, the amount of your true take-home pay. Hence, the health insurance has no effect on your personal return.
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