Slash S-Corp Taxes for Good

1. #1 Reduce Owner’s Wages.
2. #2 Cover Owner’s Health Insurance Premiums.
3. #3 Employ Your Child.
4. #4 Sell Your Home to Your S-Corp.
5. #5 Home-Office Expenses.
6. #6 Rent Your Home to Your S-corp.
7. #7 Use of an Accountable Plan to Reimburse Travel Expenses.

What is the benefit of filing for an S corporation election for tax purposes?

The tax benefit for S corporations is that business income, as well as many tax deductions, credits, and losses, are passed through to the owners, rather than being taxed at the corporate level.

How to save taxes with an S corporation?

Another minor tax savings benefit also flows from Subchapter S status: Probably an S corporation is a safer tax return to put tax deductions on. And that means you may be more comfortable claiming legitimate deductions. No CPA is going to spend a bunch of time talking about this. You get the point.

Why do you need to elect a S corporation?

An S corporation election allows the owner to draw a reasonable salary. And the corporation itself can pay the relevant FICA taxes. That can save you a bundle. Filing as an S corporation can help owners avoid double taxation. That happens when both a business’s profits and its shareholders’ dividends are taxed.

What happens when you take money out of a s-Corp?

You took $70,000 in shareholder distributions as a return on your investment, leaving $30,000 behind for business growth (the reinvestment). If you are taxed at 30%, you will pay $30,000 (100k x 30%) in taxes on $70,000 worth of “cash flow” from your business- suddenly this becomes painful and a near-45% tax rate.

How does starting a corporation lower your taxes?

Your employee payroll taxes and wages are a deduction for the company. Your salary is a write-off for the corporation → which lowers your overall profits → which lowers your taxes. That’s because you’re taxed on those profits, so when they’re lower, you pay less.