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5 Tax Strategies to Save Six Figures as a Solo Business Owner
High taxes? Here's how solo business owners can slash their tax bill and keep more profits.
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How a One-Person Business Can Save Six Figures in Taxes
A one-person business earning over $500K in a high-tax state could face a substantial tax bill—around $250K—between federal, state, and self-employment taxes. However, with the right strategies, it’s possible to save six figures in taxes. Here's how:
Elect to File as an S-Corp
Filing as an S-Corp allows business owners to divide their income into a reasonable W-2 salary and profit distributions. Self-employment taxes (social security and Medicare) apply only to the W-2 salary, leading to substantial tax savings.
Work with a CPA to Determine the Optimal W-2 Salary
It’s crucial to set a fair salary. A too-low W-2 salary may reduce eligibility for the Qualified Business Income (QBI) deduction and limit retirement contributions. A CPA can calculate the right salary to maximize benefits.
Hire a Spouse and Set Up a Solo 401(k)
Hiring a spouse and paying them a salary can provide a tax deduction of up to $138K by establishing a Solo 401(k) through platforms like Carry. For even larger deductions, setting up a defined benefit plan can allow for contributions up to $300K.
Pay State Taxes Through the Business Entity
Paying state taxes through the business entity allows the entire amount to be deductible, unlike paying on a personal return, where deductions are capped at $10K combined.
Track All Big Deductible Expenses
Paying state taxes through the business entity allows the entire amount to be deductible, unlike paying on a personal return, where deductions are capped at $10K combined.
By implementing these strategies, solo business owners in high-tax states can effectively reduce their tax burden and maximize savings.
What’s Happening at Carry?
Here’s what you can expect in the coming weeks
See the full list of events here. ⏰
Boosting Business Growth with AILearn how to use AI to help with sales and marketing tasks. They automate things like finding new customers and sending personalized messages, which saves time and money. This means business owners can grow faster, focus on important work, and boost their profits without getting bogged down in manual tasks.
How to Pay Less in Taxes in 2024 (For Professionals & High W-2 Earners)Discover tax strategies to help professionals and W-2 earners save thousands in 2024.
‣ 7 tax-saving strategies tailored for professionals and W-2 employees
‣ How adjusting your withholding, benefits, and retirement contributions can boost savings
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