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1. Employ your Child
When you employ your child, the S Corp must pay payroll taxes on the wages you pay to your child. However, the child won’t if you pay him/her $12,000 or less per year. You aren’t required to file taxes if you make less than $12,000 which means a lower tax liability for your family.
2. Take a Lower Salary
Reduce the salary your S Corp pays you and take the remaining funds as distributions. Just be careful with this step – if you lower your salary too much it could be a red flag. Determine the reasonable and customary income for your industry and pay yourself the lowest amount possible.
3. Let your S Corp buy your Primary Residence Turned Rental
Selling your primary residence allows you to exempt $250,000/$500,000 (single vs joint) from capital gains taxes. But selling it to your S Corp allows for a larger depreciable basis, reducing your taxes even further on your investment property.
4. Let the S Corp pay your Health Insurance Premiums
Let your S Corp offer insurance to you and your employees. Either have the S Corp pay the premiums for you directly or reimburse you if you pay them personally. This enables you to write off the expense on your tax return, lowering your taxable income.
5. Get Reimbursed for Depreciation Expenses
Any depreciation expenses you incur running your business (car, equipment, etc.) can be reimbursed to you tax-free. The S Corp gets to take the deduction for reimbursing you and you pay fewer taxes on your personal income.
6. Get Reimbursed for Home Office Expenses
If you run your business out of your home, let the S Corp repay you for any expenses you incur running it. The money is tax-free income for you and a business tax deduction for the S Corp. This means lower taxes all around.
7. Let the S Corp pay your Cellphone Bill
If your business provides you with a cellphone, it can be a non-compensatory fringe benefit which is excludable from taxable income. You avoid taxes on the income and the S Corp can deduct the expenses on its tax returns.
8. Let your S Corp Rent your Home
You can rent out your primary residence to your S Corp for up to 14 days a year. The S Corp can deduct the full amount of the rent expenses and you don’t have to claim the income from the rent, giving you tax-free income. However, the rent should align with the rent charged by similar venues in the neighborhood.
9. Get Reimbursed for Travel Expenses
Your S Corp can cover your business-related travel expenses but only if you submit a formal expense report. Do it right and you’ll get reimbursed tax-free while the business can write off the expenses too.
10. Get Reimbursed for Vehicle Expenses
A “heavy” vehicle used for business can provide a substantial tax break through accelerated depreciation. Plus, if your home office qualifies as a principal place of business, then all business-related commute to and from your home will give you deductible miles.