We specialize in helping clients clarify their taxes so they can keep more of their money. Many small business owners who come to see us in Fort Worth, TX are generally unaware of even the basic tax saving strategies. S corporation has to pay small business owners reasonable compensation for the services they provide to the corporation. If the corporation pays small business owners health insurance premiums, does that change the salary amount they need to pay themselves? Small business owners’ reasonable compensation is the total value of remuneration the receive from the corporation, including both cash salary and benefits.

Say that your health insurance cost is $10,000. If you reduce your cash salary by the $10,000 (versus increasing it by $10,000), you have two good tax outcomes:

  1. You’ll save 15.3 percent in FICA taxes on the $10,000 decrease in cash wages (assuming your salary is less than $128,700).
  2. You’ll increase your possible Section 199A deduction by up to $2,000 (20 percent of $10,000) by avoiding the additional wage expense that would otherwise reduce your qualified business income.

If you or someone you know is self-employed or a small business owner, please feel free to contact me at either (817) 313-4352, or by email at tbender@bender-cpa.com.

 

Tatsiana B. Bender
Bender CPA, PLLC
Fort Worth, TX 76107
tbender@bender-cpa.com
Phone: (817) 313-4352
Bender-CPA.com