I'm wondering if anyone has thoughts on this scenario. The 100% shareholder has insurance through the state exchange with a nonsubsidized premium of $300 a month. The S corporation is paying this premium, taking the deduction and including that amount in Box 1 of the W-2. When it comes time to file the shareholder's 2021 tax return they are eligible for a premium tax credit of $2,000 because their actual income is less than what was included on their insurance application.

My question, does the shareholder need to somehow reduce their self-employed health insurance deduction for the premium tax credit? It seems unfair they would be able to deduct the entire $3,600 ($300 x 12) when they are only actually paying $1,600 after taking into account the premium tax credit.

Alternatively are they not able to take the premium tax credit to the extent the S corporation paid for and deducted those premiums?

Any thoughts would be greatly appreciated!