Should You Set Up an S-Corp?
If you're running a small business and want to save money on taxes, setting up an S-Corp might be worth looking into. It’s not a loophole, and it’s not for everyone—but it’s a legit way to pay less in taxes while staying above board.
What Is an S-Corp?
An S-Corp is a business structure that passes income directly to the owner without the business itself paying income tax. You only pay taxes on your personal return. This avoids double taxation, which happens with C-Corps.
The business files Form 1120-S and you, the owner, receive a Schedule K-1 to report income on your personal return.
How It Saves You Money
- No self-employment tax on all profits: You pay 15.3% self-employment tax only on the salary you give yourself—not on your distributions.
- Write off business losses: If your business loses money, you can deduct that against your personal income if structured correctly.
- 20% QBI deduction: Many service businesses qualify for this write-off on business profits.
- Health insurance can be deducted: If done properly through payroll, health premiums may be deductible.
Other Tax Perks of an S-Corp
- Write off tools, software, office supplies, vehicle use, travel, and more.
- Deduct home office expenses.
- Pay yourself a reasonable salary and avoid tax on the rest.
- Hire your kids for real work—pay them tax-free up to $13,850 and deduct it.
- In some states, pay state tax through the business (PTET) and reduce your federal burden.
- Claim credits for hiring, training, or energy efficiency, where available.
Quick Notes
- S-Corp tax filing deadline is March 15—not April 15.
- If you pay for something personally, the business must reimburse you for it to be deductible.
- You must run payroll and file the correct forms to maintain S-Corp status.
Final Thoughts
S-Corps aren’t complicated. They’re just a smart structure to help you avoid unnecessary taxes. If you’re making good profit and willing to stay organized, an S-Corp can help you keep more of what you earn.