Biden Uses S-Corp to Avoid $500K in Taxes (S-Corps Explained)

Biden's tax returns were released, and it's "reported" that he avoided paying up to $500,000 by having his business taxed as an S-Corp

When your business is taxed as an S-Corp, you automatically become an investor and an employee within your own business

The money you pay yourself as an "investor" is not subject to 15.3% self-employment tax

The money that you reasonably pay yourself as an employee still is

If you were taxed as a Sole Proprietor or Single Member LLC, there is no breaking it up you pay 15.3% on the entire amount

Let's take a look at an example

Taxed as Sole Proprietor or Single Member LLC:

Net income: $100,000

SE Tax (15.3%): $15,300

Taxed as S-Corp

Net income: $100,000

Investor pay (0%): $50,000

SE Tax: $0

Employee pay (15.3%): $50,000

SE Tax: $7,650

In this example, taxing the business as an S-Corp creates savings of $7,650 in SE taxes

The sole purpose of an S-Corp is to help you pay less SE taxes, and the best practice is to consult with a tax pro before going the S-Corp route.

In our practice, we recommend our clients to become S-Corp when their net profit is $80,000 or higher.

If you would like help with your business taxes or becoming an S-Corp please give us a call or text at (214) 396-6009 or visit workwithduke.com