Tips to Supercharge Your S-Corp

1. Dial‑In a Reasonable Salary, Then Distribute the Rest

The IRS insists that shareholder‑employees receive “reasonable compensation” before profits are taken as dividends. Distributions themselves escape the 15.3 % FICA bite that wages suffer.

Hypothetical: Alex runs DesignCo with $180 k of annual profit. By setting a well‑supported salary at $70k and taking the remaining $110 k as distributions, Alex trims roughly $16k of payroll tax—money that can fund the company espresso bar instead of Uncle Sam’s.

Pro tip: Document salary benchmarks (industry surveys, prior W‑2s) so “reasonable” looks reasonable in an audit.

2. Adopt an Accountable Plan for Expense Reimbursements

An accountable plan lets the S‑corp reimburse owners for business costs (home office, mileage, cell phone) tax‑free to the shareholder and deductible to the company.

Hypothetical: Jamie buys a $5k laptop and racks up $2k of work travel on a personal card. Under an accountable plan, the corp pays Jamie back $7k; Jamie reports zero income, while the corp deducts the full amount—lowering both taxable income and the “reasonable salary” floor discussed above.

3. Super‑Charge Retirement With a Solo 401(k)

Because shareholder W‑2 wages determine plan limits, choosing the right salary unlocks up to $69k (2024 limit) in contributions—or $76,500 if you’re 50+.

Hypothetical: Morgan pays herself $100k. She defers $23k as an employee (plus a $7,500 catch‑up), and the corporation kicks in a 25 % employer match ($25k). That’s $55,500 sheltered—growing tax‑deferred while Morgan’s future self sends thank‑you postcards from Maui.

4. Run Health Insurance and HSAs Through the S‑Corp

When the company pays premiums for a >2 % shareholder, those amounts are added to the owner’s W‑2 (Box 1) but avoid payroll taxes and remain 100 % deductible “above the line.” Pair the plan with a Health Savings Account, and both the corp and shareholder may enjoy extra deductions.

Hypothetical: Taylor’s family policy costs $18k a year. The S‑corp pays it, deducts $18k, and Taylor claims the same $18k as an “SE health” deduction, slicing taxable income on both returns.

5. Engineer the 20 % Qualified Business Income (QBI) Deduction

Section 199A lets many pass‑through owners deduct up to 20 % of qualified income—provided taxable income and W‑2 wages are within tight guardrails.

Hypothetical: Pat projects $420k of S‑corp income, bumping against the 2025 phase‑out. By funding a Solo 401(k) and using an accountable‑plan reimbursement, she nudges taxable income below the limit and secures a $70k QBI deduction—turning careful math into real cash.

Checkpoint: Monitor wages, depreciation, and retirement contributions in Q4 so last‑minute tweaks don’t become last‑minute regrets.

Bottom Line

Smart S‑corp owners don’t just keep score; they write the playbook. From salary calibration to retirement mega‑funding, each move above turns ordinary transactions into intentional tax savings. If trimming your 2025 bill sounds better than funding new IRS wallpaper, book a Beaconshire strategy session—because spending $10 to save $100 is the kind of math we can all get behind.