How To Maximize S Corp Tax Savings

Summary

In this educational video, CPA Navi Mirage unveils a unique S Corp tax-saving strategy that can potentially save business owners an additional 29% in social security and medicare taxes. By integrating health insurance premiums and Health Savings Account (HSA) contributions into payroll, viewers learn to maximize tax savings beyond traditional S Corp benefits. Mirage's course offers a comprehensive guide to implementing these strategies for significant financial advantages.

Takeaways

• 😀 The video discusses a unique S Corp tax-saving strategy that can save an additional 29% in Social Security and Medicare taxes.
• 📚 Navi Mirage, a CPA, is the presenter who creates content to help people save on taxes through various platforms.
• 🔑 The key to maximizing S Corp tax savings is to incorporate health insurance premiums and Health Savings Account (HSA) contributions into the S Corp structure.
• 💼 As a sole proprietor, an individual is taxed on all profits and must pay Social Security, Medicare, federal income, and possibly state income taxes.
• 💡 Forming an LLC and electing S Corp status allows for tax savings by splitting profits into a salary (reasonable compensation) and distributions.
• 💰 The traditional S Corp strategy can save approximately $9,000 in Social Security and Medicare taxes compared to being a sole proprietor.
• 🏥 By including health insurance premiums and HSA contributions in the S Corp payroll, the taxable income for Social Security and Medicare taxes is reduced, leading to further savings.
• 📉 The additional savings from incorporating health insurance and HSA contributions into the S Corp strategy is about $11,826.90, which is a 34% tax savings over being a sole proprietor.
• 🤔 The video suggests that contributing to Social Security may not be as beneficial as investing in a solo 401k, especially considering the limitations of Social Security benefits.
• 📝 Navi Mirage offers a course on his website, navimuradcpa.com, which provides detailed instruction on implementing various tax-saving strategies, including the one discussed in the video.
• 👨‍🏫 The video concludes with a reminder that viewers should not only learn about tax-saving strategies but also understand how to implement them effectively.

Q & A

What is the main focus of the video by Navi Mirage?

The video focuses on a strategy to maximize S Corp tax savings, which includes incorporating health insurance premiums and HSA (Health Savings Account) contributions into the S Corp structure to save additional money on taxes.

Who is Navi Mirage?

Navi Mirage is a CPA who produces content across social media platforms to help people save thousands of dollars in taxes.

What is the potential tax savings from using the traditional S Corp strategy compared to being a sole proprietor?

The traditional S Corp strategy can save approximately $9,000 in Social Security and Medicare taxes compared to being a sole proprietor, which represents a 26% tax savings.

How does the S Corp strategy work in terms of Social Security and Medicare taxes?

In the S Corp strategy, the individual pays Social Security and Medicare taxes only on the 'reasonable compensation' portion of their income, rather than the entire profit, which is the case with a sole proprietorship.

What is the additional tax savings when incorporating health insurance premiums and HSA contributions into the S Corp strategy?

By incorporating health insurance premiums and HSA contributions, the additional tax savings can be around $2,900, which is an additional 29% in tax savings over the regular S Corp strategy.

Why is it important to consider state income tax when calculating total tax liabilities?

State income tax is important because it varies by state and can significantly affect the total tax liability. If a state has a flat tax rate, it must be included in the calculation to understand the full tax burden.

What is the role of 'reasonable compensation' in the S Corp tax strategy?

'Reasonable compensation' is the salary portion of the S Corp owner's income on which they pay Social Security and Medicare taxes, as opposed to the entire profit which would be taxed if they were a sole proprietor.

How does the S Corp strategy impact federal income tax?

The S Corp strategy does not change the federal income tax. The owner still has to pay federal income tax on their total income, but the strategy helps save on Social Security and Medicare taxes.

What is the significance of contributing to a Health Savings Account (HSA) in the context of the S Corp tax strategy?

Contributing to an HSA allows the S Corp owner to save more money on federal and state income taxes, as these contributions are tax-deductible and the funds grow tax-free.

What are some additional resources provided by Navi Mirage for further understanding of tax-saving strategies?

Navi Mirage provides a course on his website, navimuradcpa.com, which offers detailed instruction on implementing various tax-saving strategies, including bookkeeping, accounting, and specific strategies like hiring children, meals, travel, and healthcare premiums.

What is the potential total tax savings when using the advanced S Corp strategy with health insurance premiums and HSA contributions?

The advanced S Corp strategy, including health insurance premiums and HSA contributions, can save approximately $11,826.90 in total taxes, which is a 34% tax savings over being a sole proprietor.