Yes, for S corporation health insurance purposes, a spouse is considered a >2% shareholder due to IRS "family attribution" rules. If a spouse (or child, parent, grandchild) owns stock, or if you own stock and your spouse works for the company, they are treated as a >2% owner. Consequently, health premiums paid for them must be reported as taxable income on their W-2.
Let's start with the S corporation: An S corporation may deduct the health insurance and accident insurance premiums it pays for 2% shareholders, spouses, and their dependents. But to do so, it must report the premiums as wages on the respective shareholder's W-2.
A dependent may be a spouse, domestic partner, or child (some plans refer to "spouse and dependents" meaning that they differentiate between the spouse and the children). You can cover your biological, adopted, and stepchildren.
(1) Members of a family treated as 1 shareholder (A) In general For purposes of subsection (b)(1)(A), there shall be treated as one shareholder— (i) a husband and wife (and their estates), and (ii) all members of a family (and their estates).
If your company is incorporated, adding a spouse as a shareholder has its perks. If your spouse is not actively involved in the business and has a lower taxable income, you can withdraw a higher amount from the business through dividends.
The "2% rule" for S Corporations treats shareholders owning more than 2% of the company's stock (or voting power) differently for fringe benefits, classifying them like partners in a partnership, not regular employees; this means benefits like health insurance premiums paid by the S Corp must be included as taxable wages on their W-2, rather than being tax-free, though the shareholder can often deduct these premiums as an "above-the-line" deduction. This rule prevents them from participating in tax-advantaged Section 125 cafeteria plans, making benefits like Health FSAs unavailable on a pre-tax basis.
Once you are married, you are eligible to join one another's employer-sponsored health insurance. Typically, employees may only make changes to health insurance during the open enrollment period, which normally takes place one month out of the year.
Include your spouse if you're legally married. If you plan to claim someone as a tax dependent for the year you want coverage, do include them on your application. If you won't claim them as a tax dependent, don't include them. Include your spouse and tax dependents even if they don't need health coverage.
Who are dependents? Dependents are either a qualifying child or a qualifying relative of the taxpayer. The taxpayer's spouse cannot be claimed as a dependent. Some examples of dependents include a child, stepchild, brother, sister, or parent.
Marriage brings together many things, like hearts, households, finances — and even health insurance. True, it may not be the most romantic notion, but marriage is one of the qualifying life events that allows you to change your insurance plan or add your spouse to your plan outside of the open enrollment period.
(A 2-percent shareholder is someone who owns more than 2 percent of the outstanding stock of the corporation or stock possessing more than 2 percent of the total combined voting power of all stock of the corporation.)
Spouse: Your current spouse is often eligible to be added as a dependent on your health insurance. Usually, this won't include ex-spouses.
Can I keep my own health insurance and join my spouse's plan? Yes, you can have dual enrollment in your own and your spouse's health plans.
The IRS doesn't allow you to claim a domestic partner as your only dependent and file as a Head of Household. The only way to claim a domestic partner as a dependent and also file under the Head of Household filing status is also to have another qualifying dependent on your return.
Family members who are not lawfully present, including undocumented immigrants, may apply for health insurance for citizens and lawfully present family members.
The 2024 International Foundation of Employee Benefit Plans Employee Benefits Survey found that 13.5% of responding health plan sponsors impose a spousal surcharge and 7.1% include a spousal carve-out. The average monthly surcharge was $157.
A spousal carve-out, also known as a working-spouse provision or spousal exclusion, is a more drastic approach whereby a spouse who is eligible for other group health plan coverage is rendered ineligible for the employer's plan.
Institute a spousal surcharge
This is an additional fee when a spouse has access to health insurance through their own employer but chooses to join their partner's plan. Employers should consider that this may increase employee costs, which are already predicted to rise.
So, a corporation formed during the marriage–or with marital assets/income–is considered community property. And, as a result, each spouse immediately owns the property. And because of that ownership, they are inherently a shareholder of the business.