Q: I am the 50 percent owner of an S corporation. Can I deduct company-paid health insurance premiums on my personal return without forfeiting the expense due to the reduction in itemized deductions? J.L., via e-mail
A: Yes. Starting in 2003, an employee-shareholder of an S corporation owning more than 2 percent of the stock is generally entitled to deduct 100 percent of the cost of health insurance for the entire family. (This is after the company has deducted the premiums and reported them as taxable income to you on your Schedule K-1.) Claim the write-off as an individual deduction from gross income on page 1 of your 1040. Note: This deduction is not affected by the phaseout rule for itemized deductions. The reduction in itemized deductions only applies to certain expenses claimed on Schedule A. It equals a
3 percent reduction of the excess over an annual adjusted gross income threshold ($139,500 for 2003). In no event can the reduction exceed 80 percent of the affected itemized deductions.