Short answer: if you own more than 2% of an S corporation in Missouri, the company pays or reimburses your health insurance premiums and puts them in Box 1 of your W-2 as wages, but not in the Social Security and Medicare boxes. You then take them back off your income as the self-employed health insurance deduction, on Form 7206 and Schedule 1, line 17. Missouri starts from federal adjusted gross income, so the deduction also lowers your Missouri tax, at the 4.7% top rate for most owners. (Reviewed November 2026 by Daniel Griffin, licensed independent advisor, NPN #22052447. Not tax advice; confirm with your tax preparer.)
- $9,608a year of the lowest-cost Silver plan for a 40-year-old in the typical Missouri county, 2027
- $1,470of Social Security and Medicare tax a Missouri owner skips on it, against the same amount paid as salary under $192,300
- Box 1where those premiums land on your W-2; Boxes 3 and 5 stay clear of them
- 4.7%Missouri’s top income tax rate for tax year 2025, the latest the Department of Revenue has published
How the Money Moves in Missouri
- Buy the planAny of the 6 insurers on the Missouri marketplace, or a private plan, in your name or the company’s.
- The S corp pays$590 a month for a 40-year-old’s cheapest 2027 Silver plan in St. Louis area, paid or reimbursed by the company.
- Payroll adds it$7,083 a year goes into W-2 Box 1 wages, not Boxes 3 and 5.
- Form 7206The deduction is worked out there, capped at your Medicare wages.
- Schedule 1Line 17: the $7,083 comes back off your income.
A more-than-2% shareholder is treated like a partner for fringe benefits, so the premiums cannot be a tax-free benefit the way they are for staff. IRS Notice 2008-1 is the route around that: wages for income tax, left out of Social Security and Medicare wages, then deducted under section 162(l).
Paying the premiums from your personal account and never running them through the company. The IRS’s own example in Notice 2008-1 is a shareholder who pays for a policy in their own name with no reimbursement: no plan established by the S corporation, no deduction.
In St. Louis area that mistake costs the whole $7,083 and roughly $1,700 of federal income tax at 24%. The fix has a deadline: the company pays or reimburses the premiums by December 31 and adds them to your W-2. The year-end checklist has every date in order.
Work out your deduction
Form 7206-style worksheet. An estimate, not a tax return.Presets: the typical lowest-cost Missouri Silver plan for 2027. Line 10: Social Security tax to the $192,300 wage base, Medicare 2.9%, plus 0.9% over $200,000. Nothing you type leaves this page until you send it.
The Cap Most Owners Miss
The deduction cannot be more than your earned income from the S corporation, which for a more-than-2% shareholder means wages as defined for Social Security and Medicare tax (section 162(l)(5)), Box 5 of the W-2. The premiums are in Box 1 but not Box 5, so they never raise the cap, and an owner who takes no salary gets no deduction at all. For the St. Louis area plan above, a salary of $7,083 or more keeps every dollar deductible.
Three More Rules
- The spouse ruleNo deduction for any month you could join a subsidized employer plan, yours or your spouse’s, even if you did not enroll.
- Family countsYour spouse, dependents and any child under 27 at year end are covered; a Missouri family of four’s typical lowest-cost Silver plan is $2,560 a month, $30,719 a year to deduct. A spouse, child, grandchild or parent of the owner counts as a 2% shareholder too.
- Marketplace creditOnly the premium you pay after any premium tax credit is deductible. Above $63,840 of income for one person there is no 2027 credit, so the full premium counts.
What It Is Worth in Missouri for 2027
| Household | Per month | Deductible per year | Federal tax saved at 22% | At 24% | Plus Missouri tax at 4.7% |
|---|---|---|---|---|---|
| One adult, 40 | $801 | $9,608 | $2,114 | $2,306 | $452 |
| Two adults, 40, and two children | $2,560 | $30,719 | $6,758 | $7,373 | $1,444 |
Missouri starts from federal adjusted gross income (Form MO-1040, line 1) and taxes it at graduated rates that top out at 4.7%, the rate the Department of Revenue lists for tax year 2025, so the deduction lowers your Missouri tax too. The marketplace in Missouri has 6 insurers for 2027, a median of 44 plan options per county, and no PPO in any of its 115 counties: every plan is an EPO. Above $63,840 of household income for one person ($132,000 for a family of four) there is no premium tax credit, so the deduction carries the full saving.
What It Saves Across Missouri
| Where | Lowest Silver, per month | Deductible per year | Federal tax saved at 24% | Payroll tax not charged | Missouri tax saved at 4.7% |
|---|---|---|---|---|---|
| St. Louis area (Saint Louis County) | $590 | $7,083 | $1,700 | $1,084 | $333 |
| Kansas City (Jackson County) | $649 | $7,790 | $1,870 | $1,192 | $366 |
| Springfield (Greene County) | $686 | $8,227 | $1,974 | $1,259 | $387 |
| St. Charles (Saint Charles County) | $590 | $7,083 | $1,700 | $1,084 | $333 |
| Columbia (Boone County) | $801 | $9,608 | $2,306 | $1,470 | $452 |
Missouri: One Starting Line, and the S Corp Files Too
Missouri begins with federal adjusted gross income on Form MO-1040, line 1, so the deduction carries straight through and comes off income taxed at up to 4.7%. The company has its own filing: every S corporation that files a federal Form 1120-S with a Missouri-resident shareholder or Missouri income files Form MO-1120S, and sends each shareholder their share of any Missouri adjustments for the MO-1040. Missouri’s 4% corporation income tax falls on a corporation’s own taxable income; an S corporation’s income reaches Missouri through each shareholder’s MO-1040 instead, which is what the MO-1120S is for.
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Sole proprietor, partner or C corporation owner instead? The rules differ: see the self-employed health insurance deduction in Missouri and how each kind of business handles owner health insurance. With staff in Missouri, see S corp owners in Missouri and ICHRA for small businesses.
Before the year closes: the year-end checklist, every date in order. Tax professionals with Missouri clients: a printable one-page Missouri handout.
Common Questions
Can an S corp owner deduct health insurance in Missouri?
Yes, if you own more than 2% and the S corporation pays or reimburses the premiums and reports them in Box 1 of your W-2. You deduct them on Form 7206 and Schedule 1, line 17. Missouri starts from federal adjusted gross income, so the deduction also lowers your Missouri tax, at the 4.7% top rate for most owners.
What if I paid the premiums from my personal account?
Have the S corporation reimburse you and add the amount to your W-2 before it is issued. A policy you pay yourself with no payment or reimbursement by the company gets no deduction; in St. Louis area that is $7,083 a year on the cheapest Silver plan for a 40-year-old.
Does the S corp health insurance deduction lower Missouri tax?
Yes. Missouri starts from federal adjusted gross income on Form MO-1040, which the deduction reduces, and taxes it at up to 4.7%.
Sources
- IRS, Instructions for Form 7206 (2025)
- IRS, Notice 2008-1 (2-percent S corporation shareholders)
- 26 U.S. Code section 162(l)
- IRS, Publication 974 (premium tax credit)
- Missouri Department of Revenue, What’s New (individual income tax rate)
- CMS, Plan Year 2027 Qualified Health Plan Landscape file
- HHS, 2026 poverty guidelines (2027 coverage)
- Social Security Administration, 2027 fact sheet (wage base)
- Missouri Department of Revenue, Form MO-1040 (2025)
- Missouri Department of Revenue, Form MO-1120S instructions (2025)
- Missouri Department of Revenue, Corporation income tax