Almost Zero in Taxes

If you're a home services business owner earning $500,000 in profit, you don't need to waste money on unnecessary expenses to lower your tax bill. With the right strategy, you can keep most of your profit and still pay an effective tax rate of just a few percent.

1. Elect S Corporation Status

Split income between salary and distributions. For example, pay yourself $80,000 and take the remaining $420,000 as distributions. This avoids self-employment tax on the distributions.

Savings: Around $64,000 in payroll taxes

2. Max Out Retirement Contributions

• Solo 401(k): Up to $69,000
• Defined Benefit Plan: $100,000–$200,000+

Deduction: $219,000+

3. Take Bonus Depreciation or Section 179 Expensing

• $60K truck
• $15K in tools
• $10K in office improvements

Deduct: $85,000 immediately, even if financed

4. Use the Augusta Rule

Rent your home to your business for up to 14 days/year for legitimate meetings. At $750/day:

Deduction: $10,500 (tax-free to you)

5. Put Your Family on Payroll

If your spouse or kids do real work, pay them through payroll. Their income stays in the household but reduces your business’s taxable income.

Deduct: $31,000

6. Maximize Ongoing Deductions

• Mileage: $6,000
• Home office: $4,000
• Operating costs: $25,000

Total: $35,000

7. Time Income and Expenses Wisely

Defer $20K in income and prepay $10K in expenses to reduce this year’s tax bill.

Total: $30,000 more sheltered

Total Strategy Recap

• S Corp SE Tax Savings: $64,000
• Retirement Contributions: $219,000
• Equipment Depreciation: $85,000
• Augusta Rule: $10,500
• Family Payroll: $31,000
• Operating Expenses: $35,000
• Timing Strategies: $30,000

Total sheltered: $474,500

Final taxable income: $25,500

Effective tax rate: ~5% or less

Every business is different, but if you're not using these tools, you’re likely overpaying.