We all want to save money whenever it’s possible, right? That’s probably why we’re always looking for ways to lower our tax bracket.
As a business owner, it’s important to understand how your company structure affects your tax situation.
If you’re classified as an S Corporation, you’re in luck! There are some special tax benefits you can use that can help reduce the amount of taxes you may have to pay at tax time.
Let’s delve a little deeper into how you can put some money back into your pocket.
Here’s 10 Tax Saving Strategies
As an S Corporation you pass your corporate income, losses, deductions and credits through your shareholders for federal taxes. The shareholders then report that income and those losses on their personal tax returns.
But how does that put money back in your pocket? Well, as an S Corporation owner you can lower your tax burden by following these strategies.
1. Reduce Your Wages – By lowering your salary, this allows you to take the remaining S-Corporation earnings as a distribution, which isn’t subject to self-employment taxes.
2. Deduct Health Insurance Premiums – You must set your health insurance up through your S-Corporation to deduct it. Make sure to follow the IRS-required steps.
3. Employ your child – If you have children working for your S-corp, the company can save on payroll taxes by paying them from a lower bracket. In fact, you can pay your child up to $12,000 without having to pay federal income taxes while your corporation receives a deduction for their wages.
4. Sell your home to the corporation before converting it to a rental property – By selling your home to your S-Corporation, you can avoid paying taxes on the sale with a home sale exclusion of up to $250,000 gain ($500,000 if you’re married). That’s right!
5. Establish an office in your home and reimburse yourself from the corporation for the expenses.
6. Rent your home to the S Corporation for 14 days or less and then deduct the rent as an expense-As an S Corporation owner you can rent your entire home for up to 14 days per year and you don’t have to report the income.
7. Contribute to a Retirement plan.
8. Combine the home office and a heavy SUV, crossover vehicle, or pickup truck to grab big deductions – If you use your vehicle for at least 50% for business purposes, you can receive a first-year depreciation deduction under Section 179.
9. Reimburse yourself for travel expenses.
10. Deduct your smartphone and/or provide smartphones to your employees as “tax-free” fringe benefits.
As a business owner, it’s always beneficial to be proactive throughout the year on ways to implement these tax strategies. This will help keep you on track to lower your tax burden for the following year. It may seem difficult at first but it is definitely obtainable!
Have questions? Reach out to a tax professional (like us!) to discuss all the ways you can implement these tax strategies to help lessen what you may have to pay good old Uncle Sam!