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:
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”.
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.
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.
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.
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.
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.
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.
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.
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.
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.