This is probably aimed at those starting out more than the old hands but it never hurts to review.
#6: make the S-corp election. You’ll thank me later.
By law u have to pay/contribute to ss for 40 quarters or 10 years.
Yeah, it’s a red flag if you don’t pay yourself a “reasonable” salary and pay SS on it every year that you are materially involved in the business.
But you still avoid the SS tax on whatever you take as dividends. Should save us 5 or 6 grand this year.
What I never understood before, is that $25k-$30k can be considered a reasonable salary for running a small business. Provided you’re not a law firm pulling down $200k/year, lol.
Tax tip #7: watch out for the Advance Premium Tax Credit (APTC) ‘cliff’. If your Modifed AGI is over 400% of the poverty line, you lose out on the entire APTC, which is a difference of over $8k for many folks.
For 2019, 400% PL is a little over $65k. So if you’re looking at a take home of $66k to maybe $80k or more, it would make sense to figure out how to reduce your income below the 400% PL threshold (‘cause who in their right mind wants to pay over 50% tax on that portion of their income?). Make an IRA contribution or something.
Last year we would’ve been over the cliff if not for the purchase of Truck Norris. So technically speaking, that $40k-ish investment saved us over $20k in taxes. But realistically, we would’ve found some other way to get back under the threshold.