Owner-Included Coverage: Plumbing Business Tax Strategy

Can the owner be on the group plan?

C-corp owners: yes, treated like any other W-2 employee. The business deducts the employer premium share; the owner's payroll deduction is pre-tax.

S-corp owners holding more than 2% of shares: yes, but the owner's premium is added back to W-2 Box 1 wages, then deducted above-the-line on the personal return (Form 1040, self-employed health insurance deduction). Net result is similar to a deduction — just routed through the personal return.

Sole proprietors and single-member LLCs without employees: you cannot buy a group plan for yourself alone. Buy an individual marketplace plan and take the self-employed health insurance deduction on Schedule 1.

Partnerships and multi-member LLCs: partners get a guaranteed payment for the premium, which is then deducted on the personal return.

Section 125 (Premium Only Plan)

A Section 125 POP lets W-2 employees — including C-corp owners — pay their share of premiums with pre-tax dollars. That cuts both the employee's federal income tax and the employer's payroll tax (7.65% FICA) on those wages.

Cost: $100–$300/year for a basic POP document. Payback period for most plumbing shops with 4+ employees is under 2 months.

S-corp >2% owners are NOT eligible for Section 125 — their premium runs through W-2 add-back instead. Their crew is still eligible.

Family coverage and HRAs

The most common owner mistake: paying for spouse and dependent coverage personally instead of through the business. A properly designed plan lets you contribute to family tiers as a business expense.

An HRA (Health Reimbursement Arrangement) layered on top of a high-deductible plan can reimburse the owner's family for out-of-pocket medical, dental, and vision costs — all deductible to the business, all tax-free to the family.

Combining with the SHOP tax credit

If you have under 25 FTEs and average wages under $61,400, a SHOP plan + Section 125 stacks: you get up to 50% of premiums back as a credit AND the FICA savings on employee pre-tax deductions.

S-corp >2% owners' premiums don't count toward the SHOP tax credit calculation — only premiums for non-owner employees do. Plan accordingly when modeling the credit.

The 60-second action list

Confirm your entity type — it determines how owner premiums flow through tax.

Adopt a Section 125 POP if you don't already have one (W-2 employees only).

Move family coverage onto the business books wherever your entity type allows.

Re-shop at renewal — the tax strategy only works if the underlying plan is competitive.

Talk to a CPA before year-end to lock in the deductions for the current tax year.