What: Route income through an S Corp, splitting into salary (payroll-taxed) and distributions (not). Impact: Saves up to 15.3% on self-employment taxes. For $300,000 income with $100,000 salary, save $30,600 on $200,000 distributions. Tip: Set reasonable salary; consult CPA for compliance.
Estimate: On $150,000 the expected savings is over $6,000!
What: Contribute $23,500 to a 401(k) ($7,500 catch-up if 50+, $11,250 if 60-63) to reduce taxable income. Impact: Saves $8,695 at 37% bracket ($17,390 for couples maxing out).
Tip: Self-employed? Use solo 401(k) for up to $69,000 total contributions.
What: Contribute $7,000 ($8,000 if 50+) to a non-deductible traditional IRA, convert to Roth. Impact: Builds tax-free retirement wealth. $7,000 yearly at 7% for 20 years grows to $27,195 tax-free.
Tip: Convert fast to avoid gains; CPA can navigate pro-rata rule.
What: Deduct interest on $750,000 mortgage debt ($1M if pre-12/15/2017). Impact: $30,000 interest saves $11,100 at 37%. Pushes itemizing over $30,000 joint standard deduction. Tip: Verify loan qualifies; keep Form 1098.
What: Deduct rental property cost over 27.5 years. Impact: $1M property yields $36,364 yearly deduction, saving $13,455 at 37%. Real estate professionals offset non-rental income. Tip: Use cost segregation for faster deductions; CPA ensures accuracy.
Combining $23,500 (401(k)), $7,000 (Roth), and $30,000 (mortgage) cuts taxable income by $60,500, saving an estimated $22,385. S Corp and depreciation add more. Consult with your CPA.