💼Profit should exceed 40,000 USD before considering S-Corporation status.
💰High W-2 income can eliminate the tax savings of an S-Corporation.
🏢Some states do not recognize S-Corporations or tax their profits heavily.
🏠Passive income, such as rental real estate, should not be taxed as an S-Corporation.
What profit threshold should I consider before opting for S-Corporation status?
—A profit of around 40,000 USD is a general guideline, but it depends on the individual circumstances and should be discussed with a CPA.
How does high W-2 income affect the tax savings of an S-Corporation?
—If your wages already exceed the Social Security tax cap, electing S-Corporation status may result in additional payroll costs without any tax benefits.
Why do some states complicate S-Corporation taxation?
—Some states either do not recognize S-Corporations or tax their profits heavily, leading to reduced tax savings and additional expenses.
Can passive income, such as rental real estate, be taxed as an S-Corporation?
—No, passive income should not be taxed as an S-Corporation. It is subject to income taxes but not self-employment taxes.
Where can I find more information on these topics?
—You can visit my website at navimarajcpa.com or reach out to me through the contact information provided in the video description.
00:00In this video, the speaker discusses four scenarios in which it may not be beneficial to have your business taxed as an S-Corporation.
04:07The first scenario is when your profit is below a certain threshold, typically around 40,000 USD.
06:32If your W-2 income already exceeds the Social Security tax cap, the tax savings of an S-Corporation may be negated.
09:21Some states either do not recognize the federal S-Corporation election or tax the profits heavily, reducing the tax benefits.
09:51Passive income, such as rental real estate, should not be taxed as an S-Corporation.
