Mark Kohler shows how S-corp owners can split income to cut taxes. A realtor with $100,000 net profit pays $40,000 as salary and takes $60,000 as distributions, saving roughly $9,000 in FICA taxes. The key is setting a reasonable payroll amount with your accountant.
If you have an S corporation, we're going to put that right in the middle here. Make it simple. So here's my little S corp. And let's say you're a realtor and you're bringing in $150 grand and you're going to spend $50 grand on all sorts of expenses— marketing, home office, auto, dining, travel, blah, blah, blah. So $50K in expenses and you net $100K. This situation, I might take 40% in payroll. So I'm going to do $40 grand in payroll and take $60 grand with no FICA, none of that. I just saved $9,000. See, the more money you make, the more you save with an S corp. Again, You're just taking the money anytime you want, but we're going to do this payroll report quarterly and kick out a W-2 at the end of the process. And your accountant will know how to do this. You just need to be engaged in the process and make sure they're not too conservative or too aggressive.
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