Health Insurance for LLC Owners

You pick the income number the marketplace grades you on. Cross $62,600 as a single filer and your 2026 premium tax credit does not shrink. It ends.

Almost nobody else buying coverage picks that number. A salaried employee has it set by a payroll department. Yours is a guess. You make it in the fall, about a business year that has not happened.

This page is about that guess.

The premium tax credit stops at 400 percent of the federal poverty line. For one person in 2026 that is $62,600. HealthCare.gov puts the band plainly. Income from 100 to 400 percent of the poverty level qualifies you in every state.

A coverage year uses the poverty figures published the year before. So 2026 uses the 2025 column. Here it is.

Source, the HealthCare.gov poverty level glossary, read on 20 August 2026. The right column is the published figure times four. Alaska and Hawaii run higher.

One thing trips people up. The test is household income. It is not your salary, and it is not the profit of the business. If your spouse works, their pay counts.

For 2021 and 2022 there was no upper limit. The American Rescue Plan removed it. Later law carried that through 2025, and Congress did not extend it again. The enhanced credits ended on 31 December 2025.

The IRS is blunt about it. Household income must be at least 100 percent and, for years other than 2021 and 2022, no more than 400 percent of the poverty line.

So a founder who last shopped in 2023 is working from a rule that is gone.

The credit is usually paid ahead, straight to your insurer. The amount rests on the income you predicted. Then April arrives. At tax time you settle up on Form 8962. If the advance payments came to more than the credit you earned, you repay the difference.

Two parts of that repayment matter this year.

Above 400 percent, you repay all of it. That is old news. The IRS says it directly. If household income is more than 400 percent of the poverty line, you get no credit and repay every advance payment made for you.

Below 400 percent, repayment used to be capped. The caps ran from $375 to $3,250. They moved with income and filing status. For tax years after 2025 there is no cap at all, at any income. The full excess comes back.

This one catches S corp owners. The rule is about paperwork.

Say you own more than 2 percent of an S corporation. You buy a policy in your own name, with your own money. You get no above the line deduction. None.

To get it, the company must buy the policy or pay you back for it. Then it reports the premium as wages on your W-2. The premium goes in Box 1. It stays out of Boxes 3 and 5, so no Social Security or Medicare tax applies. The IRS sets this out in its guidance on S corporation medical insurance.

Same policy, same money, same person. What changes the answer is which account it left, and whether payroll wrote it down. Running payroll yourself in a spreadsheet is how this gets missed. Our comparison of payroll services covers providers that handle the W-2 treatment without being asked.

Once the premium sits on your W-2 correctly, you deduct it above the line. That lowers your adjusted gross income. Modified adjusted gross income starts from there.

Follow the loop. The premium you pay can cut the income figure that decides whether you get help paying the premium.

Yes, it is circular. The IRS knows. Rev. Proc. 2014-41 exists to tell you how to work out the deduction and the credit together.

There are two limits on it.

The deduction cannot be more than the company paid you in wages. Set a low salary to save payroll tax and you cap your own deduction. It can land below your premium.

The deduction also vanishes if you or your spouse could have joined a subsidized employer plan. That is section 162(l). It applies whether or not you joined.

Is your salary decision still open? Our guide to starting an S corp covers reasonable compensation and how the IRS tests it. Read the two together. The salary that is easiest to defend and the salary that protects your coverage are not always the same number.

Income is the famous test. It is not the first one.

You get no credit for any month when you could have had affordable coverage from an employer plan that meets minimum value. The same applies if you were eligible for Medicare, Medicaid, CHIP or TRICARE. A spouse employer plan counts.

Filing separately from your spouse also ends it. There is a narrow exception for victims of domestic abuse and spousal abandonment.

You also cannot be claimed as a dependent by someone else.

S corp owners lose one more option. A more than 2 percent shareholder cannot join a QSEHRA, under section 1372. The same goes for a health reimbursement arrangement or a flexible spending account. Staff are treated differently. A QSEHRA can pay an employee back up to $6,450 for self only coverage in 2026, or $13,100 for family coverage. You just cannot be in it yourself.

Yes. How it pays changes your tax outcome. A single member LLC taxed as a sole proprietorship can just pay the premium, and you claim the self employed health insurance deduction on your return. An LLC taxed as an S corporation must put the premium on your W-2 as wages before you can deduct it. If the company never records it, the deduction is lost even though the business paid the bill.

Most buy an individual marketplace plan. An LLC with one owner and no staff usually cannot buy group coverage, because some states will not sell a group policy to a company with a single employee. With employees, you can buy small group cover or pay them back through a QSEHRA. Your own credit is decided by household income, not by the business.

You repay the advance credit you did not earn. It joins your tax bill. For tax years after 2025 there is no cap on that repayment at any income level. Above 400 percent of the poverty line you repay every dollar. Cut the risk by taking less advance credit than you qualify for, or by telling the marketplace when your forecast changes.

Not by itself. Your share of company profit reaches your return on the K-1 however you split salary and distributions. Moving money between the two does not move household income much. The salary matters in a narrower way. It caps your health insurance deduction, and that deduction is one of the few things that can bring you under the 400 percent line.