Ten Proven Strategies For Saving Big Money As An S Corp Owner - Molen & Associates

Stay Ahead of Law Changes & Protect Yourself Against Being Audited: Corporate Transparency Act and Reasonable Compensation

Ten Proven Strategies For Saving Big Money As An S Corp Owner

Are you tired of paying massive amounts of money to the government? Strategy is essential when it comes to anything in life, but especially when it comes to saving money. Many different techniques can be used when it comes to slashing taxes as an S-Corp owner; each one is important to keep the most money possible. 

When it comes to your taxes, there are a variety of ways that you can save money. Here are ten proven strategies that can help slash your tax bill and keep more money in your pocket:

1.Reduce S Corporation Owner’s Wages 

As the owner of an S corporation, you can take in more than the standard number of dollars by receiving a lower monthly paycheck and making the surplus cash flow distributions. As you are obligated to pay yourself a “reasonable compensation” with the IRS, you should not significantly drop your wages below what the IRS considers “reasonable compensation”.

2.S Corporation Covers the Owner’s Health Insurance Premiums 

The S corporation can establish a health insurance plan for the owner-employee who owns more than 2 percent in one of two ways: 1) the S corporation pays the premiums for the owner-employee and family, or 2) the S corporation reimburses the owner-employee for the premiums.

3.Employ Your Child 

When parents seek ways to save tax money, employing their children is a great option. Tax breaks are available for parents who hire their children, and these breaks can be substantial. In addition, children who work learn essential life skills that can help them later in life. The S corporation owner pays payroll tax on a child’s salary, but the family incurs a drop in income tax. Each child can earn up to $12,000 without paying federal income taxes.

4.Sell Your Home to Your S Corporation Before Converting It to a Rental Property 

When it comes time to sell your home, you can take a few different options. You can sell it to a private party, sell it to an investor, or sell it to your corporation. Each option has its benefits and drawbacks but selling it to your corporation can be the best option for many people. You might also consider getting your S corporation to purchase your home if you wish to convert it to rental property. You can exclude the sale of $250,000 ($500,000 if you are married) from the earnings on your tax return. Additionally, you can take advantage of accelerated depreciation limitations if you have depreciated rental property.

5.Compensation for Home-Office Expenses 

According to the Internal Revenue Service, an employee could claim a home-office deduction if the space used regularly and exclusively for business is used for no other purpose. This includes a portion of the home used as an office, such as a room, desk, or shared space. The IRS also allows employees to deduct expenses related to using their home for business, such as mortgage interest, real estate taxes, rent, utilities, insurance, and repairs.

6.Rent Your Home to Your S Corporation 

To reduce the amount of taxable income, many business owners are turning to a strategy known as “renting their home to their S corporations for specific days.” This involves setting up a rental agreement between the business and the homeowners, which can lead to significant tax savings. This works because the IRS allows homeowners to deduct the rent; they charge their businesses from their taxable income.

7.Settlement of Depreciation Expenses 

An S corporation can reimburse its business owner for depreciation expenses (including Section 179 expenses) related to business use of vehicle, home office or other assets. This deduction is a tax-free reward for the S corporation owner and taxable income for the business. 

8.Reimbursement for Vehicle Expenses 

A qualifying “heavy” vehicle used for business can produce a substantial Section 179 first-year depreciation deduction. Plus, if your home office qualifies as a principal place of business, business-related trips to and from that home office rack up business miles.

9.Reimbursement for Travel Expenses 

An S corporation owner’s expenses associated with business-related travel must be submitted to and received in reimbursement by the corporation. Other arrangements almost always have unfavorable tax consequences.

10.Cell Phone Expense 

Suppose S corporation supplies an employee with a mobile or similar communication device to conduct non-compensatory business activities. In that case, this is considered a working condition fringe benefit excluded from wages. The S corporation should be able to reimburse the expense to a total specified value (including personal use) on the corporate return. The repayment is tax-free income to the employee.

In conclusion, there are many benefits to working with an S corporation. By utilizing the strategies mentioned in this article, you can save big money on your taxes. Start exploring the possibility of incorporating your business today! With any of these strategies, be sure to consult with one of our amazing tax advisors. We want you to save as much money on your taxes as possible, but we also want you to do it the right way! Call us at 281-440-6279 to schedule an appointment or request a consultation. 

The Molen & Associates Difference

Mike Forsyth

“Super helpful and timely. This is our first year with them and we look forward to trusting them with our taxes and business books for years to come.”

Caitlin Daulong

“Molen & Associates is amazing! They run an incredibly streamlined process, which makes filing taxes a breeze. So impressed with their attention to detail, organization, and swift execution every year. Cannot recommend them enough!”

Sy Sahrai

“I’ve been with Mr. Molen’s company for few years and I felt treated like family respect and dignity. They are caring, professional and honest, which hard to find these days. Love working with them.”

Credits vs Deductions: What is the Difference?

When it comes to filing taxes, understanding the difference between tax credits and tax deductions is crucial. Both can significantly reduce your tax liability, but they work in different ways. This article will delve into the distinctions between tax credits and...

IRS Audits: Understanding the Process, Red Flags, and Preparation

Navigating the complexities of the U.S. tax system can be daunting, and one of the most anxiety-inducing aspects for taxpayers is the possibility of an IRS audit. Understanding the audit process, recognizing potential red flags, and knowing how to prepare can...

Energy Tax Credits: Tax Incentives for Energy-Efficient Home Improvements and Renewable Energy Installations

In an era where environmental sustainability is becoming increasingly critical, energy tax credits offer homeowners a financial incentive to make energy-efficient home improvements and invest in renewable energy installations. These tax credits not only help reduce...

Foreign Income and Taxes: Understanding the Foreign Earned Income Exclusion and Tax Implications for Expatriates

Foreign Income and Taxes: Understanding the Foreign Earned Income Exclusion and Tax Implications for Expatriates Living and working abroad can be an exciting adventure, but it also comes with unique tax challenges. One of the most significant considerations for U.S....

Understanding the Alternative Minimum Tax (AMT): Who It Affects and How It Works

The Alternative Minimum Tax (AMT) is a crucial component of the U.S. tax system, designed to ensure that individuals with higher incomes pay a minimum amount of tax, regardless of their deductions and credits. This article explores the concept of AMT, its implications...

Tax Implications of Inheritance: Understanding Estate Taxes, Inheritance Taxes, and Step-Up in Basis Rules

Inheriting assets can be a complex affair, especially when it comes to understanding the tax implications involved. This article delves into the intricacies of estate taxes, inheritance taxes, and the step-up in basis rules, providing a comprehensive overview for...

Healthcare and Taxes: Navigating Health Savings Accounts (HSAs) and Medical Expense Deductions

Healthcare costs can be a significant financial burden, but tax-advantaged accounts like Health Savings Accounts (HSAs) and deductions for medical expenses can help mitigate these costs. Understanding these benefits can lead to substantial tax savings and financial...

Tax Credits for Families: Navigating the Child Tax Credit and the Child and Dependent Care Credit

Tax credits are essential tools for reducing the tax burden on families, helping to increase disposable income and financial stability. Among these, the Child Tax Credit (CTC) and the Child and Dependent Care Credit (CDCC) are particularly beneficial for parents and...

Retirement Contributions and Taxes: Understanding the Tax Implications of Contributing to IRAs and 401(k)s

When planning for retirement, understanding the tax implications of contributing to retirement accounts such as Individual Retirement Arrangements (IRAs) and 401(k) plans is crucial. These accounts offer valuable tax benefits, which can significantly impact your...

Texas has been declared a Federal Disaster. What does this mean?

With the storm and power outages last week, Texas has been declared a Federal Disaster. What does this mean? When a state is declared a federal disaster area by the President of the United States, it triggers a series of federal assistance measures under the Robert T....

Request an Appointment Today

8 + 15 =

Call us at

Pin It on Pinterest

Share This