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August 11, 2025 
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If you’re an S-Corporation owner paying for Obamacare health insurance, you could be missing out on a valuable tax deduction. In this video, we break down step-by-step how S-Corp owners can legally pay their Obamacare premiums through their S-Corporation and save money on taxes.
You’ll learn:
- How the IRS allows S-Corp owners to deduct health insurance premiums.
- The rules for Obamacare (ACA) health insurance deductions.
- How to properly report these premiums on your S-Corp payroll.
- Common mistakes that can cost you your deduction.
- Real-world example of tax savings for S-Corp owners.
Whether you’re enrolled in the Affordable Care Act (ACA) marketplace or just want to understand S-Corp health insurance tax rules, this guide will help you reduce your taxable income and keep more money in your pocket.
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This video is intended for education purposes and should not be taken as legal, financial or tax advice. You should consult with a professional about your unique situation before acting on anything discussed in these videos. Freedomtax Accounting and Multiservices Inc., Freedom Insurance Financial Inc., Freedom Realty Source Inc., and Freedom Immigration International Inc. are providing educational content to help small business owners and individuals become more aware of certain issues and topics, but it cannot give blanket advice to a broad audience. Things are always changing, therefore, this channel may not contain the most up-to-date information. Neither Freedomtax Accounting and Multiservices Inc., Freedom Insurance Financial Inc., Freedom Realty Source Inc., and Freedom Immigration International Inc. nor its members can be held liable for any use or misuse of this content.
TRANSCRIPTION
Are you a small business owner with an S corporation? And you’re wondering, can I pay for my Obamacare health insurance through my business? The answer is yes, and doing it the right way can save you thousands in taxes. Let’s go. Welcome to the Freedom Group channel.
We are a team of four companies with over 20 years of experience serving our community in the areas of taxes, accounting, insurance, financial planning, and real estate. We offer complete support for both your personal and business goals. Let’s break down exactly how you can pay your Affordable Care Act, or ACA, or better known as Obamacare health insurance from your S corporation, and why that can be a smart tax move.
Let’s start with the basics. If you own an S corporation that has less than 50 employees, and you’re the majority shareholder, you’ve probably realized you cannot just deduct personal expenses like health insurance directly from the business. But here’s the key.
The IRS allows you to deduct health insurance premiums like your Obamacare plan as long as you do it correctly through your S corporation. Here’s how it works in three easy steps. Step number one, the S corporation pays for the policy or reimburses you for the premium.
Step number two, that amount is reported as wages on your form W-2. And step number three, then you as the shareholder can deduct the health insurance on your personal tax return above the line, reducing your adjusted gross income. Sounds good, right? Here’s a step-by-step example.
Let’s say that you are 100% owner of an S corporation. You bought an individual Obamacare plan and that pays $500 per month. That’s $6,000 per year.
Step number one, you let your S corporation pay for the premium directly from the business bank account, or you pay it and the S corporation reimburses you. Step number two, your accountant adds the $6,000 in box number one of your W-2 as taxable wages. Important, this is not subject to social security nor Medicare taxes, just federal and state income taxes.
That same amount will be added in box 14 of the W-2 as the S corporation shareholder medical plan. Step number three, on your personal tax return, you take an above the line deduction for the $6,000. What’s the result? You reduce your taxable income without having to itemize deductions.
Now let’s talk about three benefits of why this setup can be a big win. Benefit number one, tax savings. When structured properly, you reduce your adjusted gross income, which can help you qualify for more tax credits.
Reduce your tax bill and lower your income based student loan payments. Benefit number two, more accurate business accounting. By paying the health insurance through your S corp, you’re treating yourself as an employee, just like the IRS wants.
This keeps your business books clean and helps you avoid red flags with the IRS or in an audit. And the third benefit, you may still qualify for premium tax credits. Here’s a twist, if you qualify for subsidies through Obamacare, you may still be eligible for premium tax credits as long as your income is reported correctly and not too high.
This is why tax planning is crucial. Now that you know the benefits, let’s cover three common mistakes to avoid. Mistake number one, paying the health insurance premiums personally, but never reporting them on your W-2.
That means no deduction and you’re leaving money on the table. Mistake number two, deducting the premium on your S corporation tax return as a business expense. That’s a big no-no.
The IRS says shareholder health insurance needs to be handled through wages and not as a regular business expense. Mistake number three, forgetting to coordinate with your payroll provider. If they don’t add it to your W-2, the IRS has no idea you’re entitled to this deduction.
So avoid these mistakes and you’re in good shape. Now here’s the thing, every situation is a little bit different. Maybe your income is variable.
Maybe your spouse is also on the policy, or maybe you’re switching to an S corporation this year. This is where professional help makes all the difference. Here at Freedom Group, we have helped thousands of small business owners set up their S corporations the right way, maximizing their tax savings and staying compliant with the IRS.
If you want to make sure that you’re handling your Obamacare premiums correctly, or you just need help with your S corporation, schedule a consultation with us today. The consultation link is in the description below. If you have found this video helpful, like, subscribe for more tips like this and share it with another business owner that can take advantage of this information.
Now before you go, if you’re interested in learning more about S corporations and how they can save you money, check out the video right next to me. You will learn the top tax deduction that every business owner should know. It’s right here on the screen.
Thank you and God bless you. – End of transcription
Summary
If you own an S corporation and have an Obamacare (ACA) health insurance plan, you can absolutely pay for it through your business—and doing it right can mean big tax savings. In this FreedomTax Accounting video, Carlos Hurst, Certified Tax Advisor, explains how to legally deduct your health insurance premiums and lower your taxable income.
For small business owners with fewer than 50 employees, the IRS allows deductions if you follow three steps:
- The S corp pays the premium directly or reimburses you.
- Your accountant adds the amount to your W-2 in Box 1 as wages (not subject to Social Security or Medicare) and Box 14 as “S corp shareholder medical plan.
- You deduct the premium “above the line” on your personal tax return—reducing your adjusted gross income without needing to itemize.
Example: A $500 monthly ACA premium totals $6,000 annually. By running it through your S corp as described, you get a full above-the-line deduction, keep your books clean, and potentially qualify for more credits or subsidies.
Benefits include:
- Lower taxable income and possible eligibility for more tax credits.
- Cleaner business accounting and compliance with IRS guidelines.
- Potential to still qualify for ACA premium tax credits with proper income reporting.
Common mistakes to avoid:
- Paying premiums personally but not reporting them on your W-2.
- Deducting the premium directly on your S corp tax return as a business expense (not allowed).
- Failing to coordinate with your payroll provider so the W-2 is correct.
Carlos emphasizes that each situation is unique—especially if your income fluctuates, your spouse is on the plan, or you’re new to S corporation status. FreedomTax Accounting has helped thousands of small business owners set up their S corps correctly to maximize tax savings and maintain compliance.
If you’re unsure whether you’re handling ACA premiums the right way, schedule a consultation with FreedomTax Accounting to make sure you’re getting the full benefit without IRS headaches.
