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The FICA net benefit window for s-corps is pretty narrow in the face of the 199A deduction. I haven't run the numbers recently but s-corp doesn't make sense unt
by zrail 5y ago
The FICA net benefit window for s-corps is pretty narrow in the face of the 199A deduction. I haven't run the numbers recently but s-corp doesn't make sense until you hit something like $100k gross income to start with because of the tax prep fees and then social security tax stops at $160k-ish of W2 income.
The 199A deduction lets most sole proprietorships deduct 20% of net income. S-corps can only deduct 20% of payroll.
There are certainly other benefits to operating as an S-Corp (using an HRA and HSA in the same tax year is a particular favorite) but the income/fica benefits are overstated these days.
- aantix 5y ago> HRA and HSA in the same tax year Curious, what's the benefit there?
- zrail 5y agoAn HRA lets you deduct 100% of qualified medical expenses by paying for them through your company. An HSA lets you deduct up to $7200 for future medical expenses. In 2016 we deducted something like $40k off of our income between premiums, deductibles and copays (HRA) and maxing our HSA.
- aantix 5y agoWas just working through this calculator https://proconnect.intuit.com/tax-reform/entity-selection-calculator/ https://proconnect.intuit.com/tax-reform/entity-selection-ca... It does appear that a Schedule C ends up with more cash after taxes, when factoring in the 199a. I need to revisit my assumptions.