Updated: Jul 9, 2019
The Bradford Tax Institute has some great tips for small business owners (you!). Check out a few tips (https://bradfordtaxinstitute.com/Welcome.aspx). There is a FREE TRIAL available -
Reduce S Corporation Owner's Wages
As the owner of an S corporation, you can legitimately cut payroll taxes by thousands of dollars by paying yourself a lower salary and taking the rest of your income as distributions. But you need to make sure that you don’t drop your salary below what the IRS considers “reasonable compensation.”
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.
Employ Your Child
The S corporation owner must pay payroll taxes on the child’s wages, but the family enjoys a decrease in income taxes. Each child can earn up to $12,000 without paying any federal income taxes.
Sell Your Home to Your S Corporation Before Converting It to a Rental Property
If you plan to convert your personal residence into a rental property, consider first selling the home to your S corporation. You can avoid taxes on the sale with the home-sale exclusion of $250,000 gain ($500,000 if married). Additionally, you increase the rental property’s depreciable basis, which provides for greater depreciation deductions.
Reimbursement of Home-Office Expenses
When the S corporation reimburses the owner for home-office expenses, this reimbursement is a deduction for the S corporation and tax-free income to the owner.
Rent Your Home to Your S Corporation
An S corporation owner can rent his or her entire home to the S corporation for up to 14 days per year and get big tax deductions. The S corporation deducts the full amount of the rent, and the owner realizes the income completely free of income tax.
Reimbursement of Depreciation Expenses
The S corporation can reimburse the S corporation owner for depreciation expenses (as well as Section 179 expenses) related to business use of a vehicle, a home office, and other assets. This is a deduction for the S corporation and tax-free income for the owner.
Reimbursement of 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.
Reimbursement of Travel Expenses
An S corporation owner who incurs business-related travel expenses must submit an expense report and be reimbursed by the S corporation; other arrangements have disastrous tax consequences.
Cell Phone Expenses
When an S corporation provides an employee with a smartphone or similar telecommunications equipment primarily for non-compensatory business reasons, this is considered a working condition fringe benefit that is excludable from income. The S corporation can reimburse the employee for the full cost of the phone expenses (including the personal use) and deduct this amount on the corporate tax return. The reimbursement is tax-free income to the employee.
Concepts Real Estate School brought in a rep from the Bradford Tax Institute last tear to share some information. We will look to bring them in again, but in the meantime, check them out at https://bradfordtaxinstitute.com/Welcome.aspx.