Can an S Corp Deduct Employee Shareholder Health Insurance and HSA Costs as Business Expenses?

As a small business owner operating as an S Corporation, you may wonder if you can deduct the cost of health insurance and Health Savings Account (HSA) contributions for employee shareholders as business expenses. The good news is that S Corporations can typically deduct these expenses, providing a valuable benefit to your employees while also reducing your company's tax liability.

Here's how it works:

• Health Insurance Premiums: S Corporations can deduct the cost of health insurance premiums paid for employee shareholders as long as the premiums are included as compensation on the employee's W-2 form. This deduction helps offset the costs of providing health insurance coverage to your employee shareholders.
• HSA Contributions: Similarly, S Corporations can deduct contributions made to employee shareholder's Health Savings Accounts (HSAs) as long as the contributions are reported as taxable income to the employee. These contributions can provide a tax-advantaged way for your employees to save for medical expenses.

By offering health insurance coverage and contributing to your employee shareholder's HSAs, you are not only providing valuable benefits to your employees but also taking advantage of tax deductions that can benefit your business. It's a win-win situation that can help you attract and retain top talent while also saving on taxes.

If you own a small business structured as an S Corporation, you might be contemplating how the health insurance premiums and HSA contributions could impact both your funds and your employees. Knowing that S Corporations can deduct these expenses is a significant advantage that not only enhances your employee compensation but also benefits your bottom line through reduced tax liabilities.