Health Insurance & Retirement Plan Contributions

A TTS S-Corp can deduct health insurance and retirement plan contributions.

Health insurance and retirement plan contributions require self-employment income (SEI), but trading income is not SEI. Exception: If a trader uses a full-scale membership to a futures or options exchange for trading Section 1256 contracts on that exchange, it is SEI (Section 1402i).

A sole proprietor (individual) with trader tax status (TTS) cannot pay them compensation, so they cannot arrange earned income to deduct health insurance and retirement plan deductions.

Traders eligible for TTS in an S-Corp can pay officer compensation to unlock deductions for health insurance premiums. Based on sufficient profits in the S-Corp, it can increase officer compensation to maximize a high-deductible retirement plan contribution like a Solo 401(k).

Investment companies without TTS may not pay compensation to owners to unlock employee benefit plan deductions.

Learn about high-deductible retirement plan options for TTS traders on our Retirement Solutions page. Learn about entities for traders on our Entity Solutions page.

For more in-depth information about S-Corp officer compensation, health insurance premium deductions and retirement plans, read Green’s Trader Tax Guide.