IRC § 162(l) Health Insurance Deduction

Definition

A provision allowing self-employed individuals, including more-than-2% S corporation shareholders, to deduct health insurance premiums paid for themselves, their spouse, and dependents as an above-the-line deduction on Form 1040. For S corp owners, the corporation must first pay or reimburse the premium and include the amount in the shareholder-employee's W-2 Box 1 wages before the deduction can be claimed. Failure to follow this exact payroll and reporting sequence disallows the deduction or exposes the return to IRS scrutiny.