Article Date:
April 2024

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Tax Reform Doubles Down on S Corporation Reasonable Compensation

For tax years 2018-2025, the Tax Cuts and Jobs Act (TCJA) tax reform gives you a valuable 20 percent deduction on your pass-through business income if you have the right business and the right taxable income.


The S corporation is a pass-through entity. That’s one step in the right direction.


In addition, the S corporation gives you some ability to maneuver your 20 percent deduction and perhaps even qualify for it, as we explain in Don’t Let the Cliff Kill Your New Section 199A Tax Deduction.


In the article above, we explain a strategy that involves lowering your S corporation salary to realize both a reduction in payroll taxes and the new Section 199A 20 percent deduction.


But beware: not paying yourself an appropriate salary as an S corporation owner can torpedo your deductions, causing extra taxes and penalties.


Reasonable compensation is now more important than ever. We’ll explain why—and what you can do to come out ahead. ... Log in to view full article.

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