Ten Proven Tax Strategies for Saving Money as an S Corp Owner

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”.

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

As another S Corp owner tax strategy, the S corporation can establish a health insurance plan for the owner-employee who owns more than 2 per cent 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.

  1. 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.

  1. 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 to utilize as S Corp tax strategies. 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.

  1. 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 as an S Corp tax strategy. 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. 

  1. Rent Your Home to Your S Corporation

To reduce the amount of taxable income, many S corp owners are turning to a tax 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.

  1. 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.

  1. 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.

  1. 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 unfavourable tax consequences.

  1. 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! To learn more about these tax strategies to save money as an S Corp owner, 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.”

Should I Open an HSA?

Should I Open An HSA Account? Are you considering a Health Savings Account (HSA)? If so, it is vital to understand what exactly an HSA entails. With this guide, you'll learn all about it: the advantages of an HSA and how it can help you manage your medical expenses....

Personal Finance Tips for Young Adults

As someone who has been working for most of their life, I wish there was someone out there who had shown me the correct way to save money for my future. Now that I am in my 30s, I have been getting better at saving money, but there are some personal finance tips that...

How to Track Expenses

There are many different methodologies, tools, tips, and tricks for tracking expenses, and it ultimately depends on your lifestyle and how actively and accurately you want to track them. This is information I’ve pulled from other sources and compiled into a few...

How To Accurately Record Commuting Mileage and Increase Tax Deductions

Increase Tax Deductions With the Business-Mileage Rule Using the Business Mileage tax deduction can be tricky. There are lots of situations that count while others do not. We don’t like commuting mileage. You should dislike it, too. It’s personal. It’s not deductible....

Bookkeeping 101

As a new business owner, you will certainly have some responsibilities you won’t be able to avoid. One of those non-negotiable part of your business is producing financial statements. It can be overwhelming trying to master a topic such as bookkeeping but don’t worry...

Bankruptcy – Everything You Need to Know

Everything you need to know Filing for bankruptcy protection is considered a statement on your ability to repay your debt to your creditors. Filing for bankruptcy will also put a halt to foreclosure or legal actions against you, and it stops creditors from calling and...

Top Tax Tips for 2023

Tax Refunds May Be Smaller This Year Plan now to learn these 2023 tax tips avoid surprises in the future! If you’re expecting a tax refund in 2023, it may be smaller than last year, according to the IRS. Your annual balance is based on taxable income, calculated by...

What is an EA?

Have you ever seen the title EA next to a tax professional’s name and wonder what it means? Or maybe you’re familiar with the title and you’re curious about the differences between an EA and CPA? Either way, in this blog I will be answering these frequently asked...

History of Federal Income Tax Rates: 1913 – 2021

The United States federal government levies taxes on the income of its citizens and legal residents. The Internal Revenue Service (IRS) is the agency responsible for collecting these taxes.  Federal income tax rates have changed several times since 1913, when the...

Familiarize Yourself With Tax Terminology

Yes, I know, tax terminology feels like a whole new language. For most people all of tax forms can be even more confusing than a foreign language. What’s the difference between itemized deduction and standard deduction? What’s Income tax?  These words and more tax...

Request an Appointment Today

10 + 9 =

Call us at

Pin It on Pinterest

Share This