Finance hack for anyone who works for themselves: Look into setting up an S Corp. Here's how you can see if it makes sense for you and potentially save tens of thousands of dollars in taxes every single year by doing it correctly.
Talk with a tax pro first
An S Corp only works if you already have an LLC set up (because it's a special election made to the government). It generally makes sense when you're earning $100K+ annually. A good CPA or tax advisor can confirm if this election makes sense in your state.
Pay yourself a “reasonable” W-2 salary
The IRS expects your salary to reflect fair market value for your role, based on your duties and experience. Too low looks like tax evasion; too high cancels the benefits. The ideal setup means you pay Social Security and Medicare (~15%) only on your salary portion, not your full profit.
Distribute the rest as profit
Profit distributions aren't subject to self-employment tax, saving you roughly 15% in payroll taxes — often a five-figure savings.
Unlock the Qualified Business Income (QBI) deduction
With the right W-2 salary, you can qualify for a 20% QBI deduction, worth $10K–$50K+ depending on your income.
Max out your retirement contributions
Your W-2 salary determines how much you can contribute to a 401K or defined benefit plan. Get it wrong and you reduce your ability to shelter money — consult your CPA.
Stack other strategies
Once your S Corp is set up, layer in retirement plans, spousal income strategies, and entity-level deductions for additional tax efficiency.
Almost any solo business owner or consultant earning $80K–$100K+ in net income can use this structure. Done right, it's one of the cleanest ways to reduce your tax bill without changing how your business operates.
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