Small business owner tax strategies for S corporation:

Small business owner tax strategies for S corporation:

1. **Pay yourself less**: If you’re paying yourself too high of a salary, you could be overpaying in thousands of dollars on your S corporation’s payroll taxes. You still need to pay yourself reasonable compensation for the job you’re performing for the company, but you want to make sure you’re not overpaying yourself. Your business will report your well-thought-out salary amount on Form 1125-E and carry the total from that form over to the “Compensation of officers” on line 7 of your Form 1120-S.

2. **Deduct your health insurance premiums**: If your S corp establishes the health insurance plan for you, then the premiums can be included on your W-2 taxable wages. You’ll be able to claim this deduction on your Form 1040 if you meet these criteria: The S corp must pay your premiums. You must correctly report the premiums on both your business and personal tax returns. You, the S corp owner, aren’t able to receive health insurance through another employer or your spouse’s employer. Additionally, you can deduct any premiums your S corp paid for your accident insurance, dental insurance, and/or long-term care insurance. You also don’t have to pay Medicare, unemployment, or Social Security taxes on the money your business pays for your health insurance. Finally, you don’t have to pay taxes on any health insurance your business pays for any non-owner and non-family employees through a group health insurance policy.

3. **Hire your kid**: In 2024, each child employed in the family S corp can earn up to $13,850 without paying any personal federal income taxes on that money. This decreases the income taxes for the family, so even though your S corp will have to fork over payroll taxes on those wages, you’ll still come out ahead overall.

4. **Maximize your retirement contributions**: As an S corporation owner, you can contribute to a retirement plan for yourself and your employees. You can choose from a variety of plans, including a 401(k), a SIMPLE IRA, or a SEP IRA. These plans allow you to save for retirement while reducing your taxable income.

5. **Take advantage of the home office deduction**: If you work from home, you may be able to take a home office deduction. This deduction allows you to deduct a portion of your home expenses, such as rent, mortgage interest, utilities, and insurance, based on the percentage of your home that is used for business purposes.

6. **Keep track of your expenses**: Make sure you keep track of all your business expenses throughout the year. This includes things like office supplies, travel expenses, and advertising costs. By keeping track of your expenses, you can reduce your taxable income and save money on taxes.

7. **Work with a tax professional**: Finally, it’s always a good idea to work with a tax professional who can help you navigate the complex world of S corporation taxes. A tax professional can help you identify deductions and credits that you may have missed, and can help you avoid costly mistakes that could result in penalties and fines.

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