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Small Business Health Insurance Options and How to Deduct it from Your Taxes

Let’s talk about small business health insurance options. Especially for you as the business owner, and then I’ll end with a brief mention of how to pay for health insurance and deduct it from your taxes.

I’m only covering a small snippet of small business health insurance options here. You really do need to talk to a health insurance agent about the specific options that exist for you, both in your state and based on the unique factors of your company and your team.

Group Insurance for Small Business


You’re not required to have a group insurance plan for your business until you have 50 team members or more. But if you’re in an industry like mine where the talent is really competitive, you may need to consider having some sort of a health insurance benefit before you get to 50 employees, mostly to have some sort of attraction level for A players.

Now, I personally still can’t compete with the bigger companies who offer 100% health insurance coverage. But we’re offering something, so it’s better than nothing. Any benefit you offer minimizes the hit when hiring team members.

When we were about 20 team members, we offered an FSA, which is a Flex Spending Arrangement that has very specific rules tied to whatever the IRS is controlling, and you’re limited to how much money you can put into it.

We got to the point when we were bringing in higher level team members with more experience who were paid more, where we added a second option of an HRA, a Health Reimbursement Arrangement. The HRA still has a limit, but it’s a little bit higher than the FSA, which is why at that point we offered both policies. Depending on what your salary range was, we offered one or the other.

Personal Health Insurance for a Business Owner


When it comes to your personal insurance, if you don’t have a group plan, you can go out and get a private plan by talking to any health insurance agent. Based on your income, you may or may not qualify for health subsidies. So again, it’s really important that you talk to a qualified health insurance agent so they can walk you through all those details.

How to Write-Off Your Health Insurance Premiums


These instructions are specifically for an S-Corp.

We see this done incorrectly all the time. The two biggest mistakes we see are either not paying for it out of the business, or not picking it up on their W2. We do our best to help our clients be in compliance if they made a mistake, and then set them up to prevent it from happening in the future so that they are completely in compliance.

Pay for your health insurance out of your business as an S Corporation. Pay the premium out of your business and book it as a health insurance expense. As the owner of the S Corp, assuming you own more than 2%, which in our case almost all of our clients do, you have to pick up your health insurance amount on your W2 as Additional Income. And if that sounds complicated to you, it probably should because you aren’t in the business of running payroll. Use a payroll company to make sure it’s done correctly.

Then when you file your personal tax return, there is a spot on your personal tax return called Adjustments to Income and you put your health insurance amount there so that it is reducing your taxable income.

Consult with Qualified Professionals


There are many small business health insurance options for both your business and you personally as the owner, even if you don’t have group insurance. But again, get a good health insurance agent on your side and a qualified accounting professional to help you write-off your health insurance the right way. It’s very easy to do for an accountant. But like I just explained, there are multiple steps to make sure it happens the right way. By using a professional, you get the max benefit without getting in trouble by doing it the wrong way.

Talk with a Tax Genius here at Incite Tax to make sure you’re compliant with how you’re deducting your health insurance premium from your taxes.








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