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.”

Compensation and K-1 Reporting for Partnership Owners

As a business owner of a partnership, understanding how your compensation and earnings are reported and taxed is crucial for managing your finances and staying compliant with IRS regulations. Unlike S-Corporations (S-Corps), partnerships cannot pay their owners a W-2...

W-2 Salary vs. Distributions vs. K-1 for S-Corp Owners

W-2 Salary vs. Distributions vs. K-1 for S-Corp Owners As an S-Corporation (S-Corp) owner, understanding the distinctions between W-2 wages, distributions, and K-1 profits is essential for managing your tax obligations and business finances. In this article, we will...

Non-Compete Law Changes in 2024: What Employers and Workers Need to Know

Non-compete agreements have long been a standard tool for employers seeking to protect sensitive business information and retain talent, but their future is now uncertain. In 2024, sweeping changes to non-compete agreements are expected, driven by the Federal Trade...

FLSA Changes in 2024: What Employers and Employees Need to Know

The Fair Labor Standards Act (FLSA) governs minimum wage, overtime pay, and working hours, ensuring that employees across the U.S. are treated fairly. In 2024, significant changes to the FLSA overtime rules will take effect, directly impacting both employers and...

What Tax Documents Should I Save, and How Long Should I Save Them?

What Tax Documents Should I Save, and How Long Should I Save Them? Maintaining proper tax records is crucial for both individuals and businesses. Not only does it ensure compliance with tax laws, but it also provides a safeguard in case of audits or disputes. This...

Underpayment Penalties and How to Avoid Them

Underpayment Penalties and How to Avoid Them Underpayment penalties can be a significant concern for taxpayers, both individuals and corporations. These penalties are imposed when taxpayers fail to pay enough tax throughout the year, either through withholding or...

Choosing the Right Filing Status for Your Taxes: A Comprehensive Guide

Choosing the Right Filing Status for Your Taxes: A Comprehensive Guide When it comes to filing your taxes, one of the most crucial decisions you'll make is selecting the appropriate filing status. Your filing status affects your filing requirements, standard...

Why Corporations and S-Corporations Cannot Deduct Shareholder Expenses Directly on the Corporate Return

Why Corporations and S-Corporations Cannot Deduct Shareholder Expenses Directly on the Corporate Return   When it comes to managing business expenses, corporations and S-corporations face specific rules and limitations, particularly concerning the expenses...

Understanding Storm-Related Tax Implications for Texas Tax Filers: Hurricane Beryl and the May Derecho

  As Texans, we know all too well the impact that severe weather can have on our lives and communities. This year, we've faced two significant challenges: Hurricane Beryl and the May derecho that swept through the Houston area. In the wake of these natural...

Roth vs Traditional IRA: A Comprehensive Guide

When planning for retirement, choosing the right Individual Retirement Account (IRA) can significantly impact your financial future. The two most popular types of IRAs are the Roth IRA and the Traditional IRA. Each has its unique benefits and drawbacks, and...

Request an Appointment Today

1 + 11 =

Call us at

Pin It on Pinterest

Share This