Form 7206

[Shicks]

Form 7206 self employed health insurance for a more than 2% shareholder of an S-Corp line 11 is being limited to only box 5 Medicare wages, which I believe is incorrect.  A more than 2% shareholder health insurance premiums are only reported in box 1 and 16 not in box 5.  Because my shareholders are scaling back their W-2s were not much this year and the Form  7206 is not allowing the full deduction for the SE health insurance.  Two questions - how are others getting around this limitation?  My taxpayers are allowed the full deduction. Reading the instructions my taxpayers are not required to file Form 7206, but I do not see how to not file this report in Lacerte. How can I report the full SE health insurance deduction and not include the Form 7206? 

[PhoebeRoberts]

Box 5 wages is the amount properly treated as equivalent to SE income for >2% S-corp shareholders.

[TaxGuyBill]

---

@Shicks wrote:

is being limited to only box 5 Medicare wages, which I believe is incorrect.\

My taxpayers are allowed the full deduction.

---

The program is correct and it sounds like your clients are not allowed the full deduction.  See IRC §162(l)(2)(A).

https://www.law.cornell.edu/uscode/text/26/162#l

[Accountant-Man]

A self-employed person is allowed to deduct SEHI "above-the-line" only to the extent of the self-employed earnings, .e., Sch C net income (less one-half of the SE tax).

To compare, an S corp shareholder has no SE income, so the equivalent is the EARNINGS from the S corp--meaning the wages.

The SEHI is included in Box 1 wages but NOT box 3 or 5(Medicare wages). If there are no wages other than SEHI, then the shareholder gets no deduction above-the-line.

You gotta have other wages in Box 5.