Key Takeaways
- QSEHRAs and ICHRAs are employer-provided employee benefits.
- Owner and family eligibility depends entirely on the business’s legal structure.
- If an owner can’t participate in an HRA, the tax code still permits the business to pay for health insurance, with the cost included in income and deducted personally.
Whether a business owner can participate in a QSEHRA or ICHRA depends entirely on how the business is taxed. Most owners cannot, but there are well-established alternatives that still allow owners to pay for health insurance in a tax-efficient way.
Quick Answer: Who Can Participate in an HRA?
The tax code limits tax-free HRAs to employees. Many business owners are treated as self-employed for fringe benefit purposes — even if they take a salary — which disqualifies them from receiving tax-free HRA reimbursements.
Here’s how that plays out by entity type.
Sole Proprietors
Sole proprietors are self-employed and cannot participate in a QSEHRA or ICHRA.
What to do instead
- Buy individual health insurance in your own name
- Use the self-employed health insurance deduction if eligible
Partnerships and LLCs Taxed as Partnerships
Partners and LLC members taxed as partners are treated as self-employed and cannot receive tax-free HRA reimbursements
What to do instead
- The business can pay/reimburse premiums on your behalf
- You may take the self-employed health insurance deduction if eligible
Non-owner employees (including family members who are not partners/members) can still participate in the company’s QSEHRA or ICHRA.
S Corporations (>2% Shareholders)
If you own more than 2% of an S-corp, you’re treated as self-employed for fringe benefits (even if you are a W2 employee) and cannot participate in a QSEHRA or ICHRA.
What to do instead
- The S-corp pays or reimburses your individual premiums
- Premiums are included in your W-2 wages (income tax only)
- You may take the self-employed health insurance deduction if eligible
C Corporations
C-corp owner-employees are treated as employees for fringe benefits and can participate in a QSEHRA or ICHRA.
