IRonMaN is correct, on their W-2. However, we have all seen where that has not happened: by ignorance, by choice, by whatever. The obvious correct answer is to issue a corrected W-2. We also know that probably won't happen. So, in these cases you need to add it to the K-1 input on the 1040 Other Income to take to Schedule 1, Other Income. And then on the K-1 worksheet record it as stockholder health insurance. The net effect is the company took the deduction. The stockholder reported it as income and then the stockholder took the self-employed health insurance benefit. A frustrating workaround for an error.