Wondering how to reduce those self-employment taxes? Here’s how!
When you’re self-employed, you don’t have taxes withheld from your pay like an employee does. You also don’t have an employer to pay their portion of the FICA taxes, meaning you have to pay it all. How can you reduce the amount you pay?
Elect to be taxed as an S-Corporation: When you elect to file as an S Corp, you generally pay yourself a reasonable salary out of your earnings. Any remaining profits flow through to yourself and any other shareholders or partners. The distributions you take (the money in excess of your salary) are subject to income tax, but not employment taxes.
Reduce your taxable income/net profit: You should be extremely thorough to ensure you deduct every possible business expense. Your business expenses need to be ordinary and necessary to operate your business to be deductible. Common business expenses are: office rent, business vehicle mileage, cell phone bills, job supplies, job equipment, etc.
Contact us to schedule an appointment to talk about how you can lower your self-employment taxes.