Where to Enter Shareholder Health Insurance in Drake Tax
Premiums for a more than 2% shareholder are reported on that shareholder W-2, in box 14 as an information item, and are included in wages. Premiums for employees who are not more than 2% owners stay with the other employee insurance as an entity deduction. Overrides on Schedule K-1 do not work for this, and amounts must follow ownership percentage or the allocation risks creating a second class of stock.
- Payroll produces the W-2
- Drake return
- Include in officer wages
| Trial balance account | Drake Tax screen and field | Lands on |
|---|---|---|
| More than 2% shareholder premiums | In W-2 wages, box 14 as an information item | Included in officer compensation, page 1 line 7 |
| Employee premiums, under 2% owners | With other employee insurance expense | Page 1 employee benefit programs |
| Shareholder deduction | The shareholder 1040 | Self employed health insurance deduction |
| K-1 overrides for this | Do not work. Drake says so explicitly | Schedule K-1 |
| Non pro rata allocation | Risks a second class of stock | Would nullify the S election |
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Try it freeWhere to Enter Shareholder Health Insurance in Drake Tax on a trial balance
| Acct # | Account | Debit | Credit |
|---|---|---|---|
| 1000 | Cash | 42,800.00 | |
| 1200 | Accounts receivable | 68,500.00 | |
| 1300 | Inventory | 55,000.00 | |
| 1500 | Equipment | 145,000.00 | |
| 1510 | Accumulated depreciation | 47,500.00 | |
| 2000 | Accounts payable | 28,400.00 | |
| 2100 | Accrued expenses | 9,200.00 | |
| 2400 | Notes payable | 92,000.00 | |
| 2450 | Due to shareholder | 15,000.00 | |
| 3000 | Common stock | 10,000.00 | |
| 3900 | Retained earnings | 86,300.00 | |
| 3950 | Shareholder distributions | 52,000.00 | |
| 4000 | Gross receipts | 612,000.00 | |
| 5000 | Cost of goods sold | 318,000.00 | |
| 6000 | Salaries and wages | 88,000.00 | |
| 6050 | Officer compensation (the account this page is about) | 72,000.00 | |
| 6300 | Depreciation expense | 21,500.00 | |
| 6900 | Other operating expenses | 37,600.00 | |
| Total | 900,400.00 | 900,400.00 |
Example journal entries
| Account | Debit | Credit |
|---|---|---|
| Insurance expense | 14,400.00 | |
| Cash | 14,400.00 |
| Account | Debit | Credit |
|---|---|---|
| Officer compensation | 14,400.00 | |
| Insurance expense | 14,400.00 |
The rule, from the form instructions
The Instructions for Form 1120-S say to report amounts paid for health insurance coverage for a more than 2% shareholder, including their spouse, dependents and any children under 27 who are not dependents, as an information item in box 14 of that shareholder's Form W-2. The shareholder may then be able to deduct the premiums on Schedule 1 of their 1040.
Premiums for employees who are not more than 2% owners are different: they are included with the expense for other employees as a deduction by the entity.
Why there is no clever screen for it
Drake states that overrides entered on Schedule K-1 do not work for this, partly because the override descriptions on the K-1 cannot be matched to the description on Schedule K for the same line.
So the path is not a tax software path. The premium has to be in the shareholder's W-2, which happens in payroll, and the return then reports wages that include it.
For the preparer working from a trial balance, that means the entry is a reclassification: premiums sitting in insurance expense move into officer compensation, and the W-2 has to agree. If the W-2 was already issued without the premium in it, that is a payroll correction, not a return adjustment.
It does not flow from the W-2 on the 1040 either
Drake notes that for a more than 2% shareholder, the health insurance will not flow anywhere from Form W-2 on the individual return. The deduction has to be entered on the 1040 deliberately.
That is the reason so many shareholders never get the deduction: everyone assumes it is automatic somewhere.
The allocation constraint
Amounts on an 1120-S should not be allocated to shareholders differently from their percentage of ownership. Doing so would create a second class of stock and nullify the S election.
That is Drake's own phrasing, and it is the reason a two shareholder company where only one is on the plan cannot simply allocate the premium to that shareholder on the return. The economics get settled between the shareholders.
Tax return treatment
| Form | Line |
|---|---|
| Form 1120S | Within officer compensation on page 1 line 7 |
| Form W-2 | Box 14 as an information item, and in box 1 wages |
| Form 1040 | Self employed health insurance deduction on Schedule 1 |
Common questions
Where do I enter more than 2% shareholder health insurance in Drake Tax?
It is not primarily a tax software entry. The premium belongs in the shareholder W-2, box 14 as an information item, and in wages, which happens in payroll. The return then reports officer compensation that includes it.
Can I override the health insurance on the Schedule K-1?
No. Drake states that K-1 overrides do not work for this, in part because the override descriptions cannot be matched to the Schedule K description for the same line.
Does the deduction flow automatically from the W-2 on the 1040?
No. For a more than 2% shareholder it does not flow anywhere from Form W-2, so the self employed health insurance deduction has to be entered deliberately on the individual return. This is why the deduction is so often missed.
Can premiums be allocated to only the insured shareholder?
Not differently from ownership percentage. An allocation other than pro rata would create a second class of stock and nullify the S election, so any difference in economics is settled between the shareholders rather than on the return.
Related answers
Go deeper
This page is the short answer. These articles work through the same ground in detail.
Last reviewed October 18, 2026.