The short answer is - YES.
The longer one: Running your health premiums through your payroll as an S-Corp owner is required by law - but it can be a tax-efficient strategy that reduces your overall tax burden!
- Health Insurance Premiums as an Above-the-Line Deduction: As a self-employed individual, health insurance premiums paid for yourself, your spouse, and dependents are generally considered an "above-the-line" deduction on your personal tax return. This means you can deduct these premiums directly from your total income, even if you don't itemize deductions. However, there is a limitation on how much you can deduct.
- Health Premiums through Payroll: Instead of deducting the health insurance premiums on your personal tax return as an above-the-line deduction, you can have the S-Corporation establish a group health insurance plan for you. The S-Corp pays the health insurance premiums on behalf of you, and includes the premiums as part of the employee's wages on the payroll.
- Payroll Tax Savings: Here's the crucial benefit: The health insurance premiums paid through the S-Corp's payroll are exempt from both income tax and self-employment tax. This means that the premiums are not subject to federal income tax, state income tax, Social Security tax, or Medicare tax. By shifting the health insurance premiums from a personal deduction to a payroll expense, you save on both income tax and self-employment tax. This can result in significant tax savings, particularly if you pay a considerable amount in health insurance premiums each year.
Formations has partnered with Vault Strategies to bring our customers a game-changing solution: A health plan that's on par with what any traditional W2 employee can get.
INTRODUCE ME TO VAULT STRATEGIES!
Vault Strategies offers affordable healthcare plans with alternatives to typical major medical health plans, including preventative care, Telehealth, and discounts on drugs and medical supplies. Establish your health plan or set up your free consultation to discuss healthcare benefits – available only to Formations customers!