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Jason A. Duprat, Entrepreneur, Healthcare Practitioner, and Host of the Healthcare Entrepreneur Academy podcast, talks about two factors that influence how much you should pay yourself as a business owner. This episode references Tactical Tuesday #231 where Jason explains how to leverage tax benefits through an S Corp. In this episode, Jason continues to discuss additional factors to consider: your FICA tax rate and retirement planning.
- Paying yourself through an S Corp. is a tax-saving strategy.
- It's important to know your retirement goals because that's going to play into how you set your W2 income.
- There are two types of retirement plans. A self-employed IRA and the contribution limit is 25% of your salary. And there's a Solo 401K or Individual 401K, which is currently capped at $19,500.
- With the Solo 401K, you can contribute on your own and the business can also contribute, which is capped at 25%.
- Each type of plan has a different set of rules, regulations, and limits around it.
- One thing to consider is if you set up a company contribution at 25% for your own retirement goals, you'll need to do the same for your employees at the same rate.
- Tax savings for your business is only one side of the equation. Planning for retirement is another so be sure to hire a consultant to guide you through both areas.
3 KEY POINTS:
- The way you set your W2 salary is going to be the biggest driver not only in your taxes in terms of FICA, but it's also going to be a factor in how much you can contribute to your retirement accounts.
- If you set your W2 salary too low, you're saving some FICA tax, but at the same time, you're limiting your ability to contribute to your retirement account.
- You have to match how much company contribution you've set up for yourself before you had employees for all employees you hire thereafter.
“You have to treat yourself, as the owner, the same way you treat your employees.” – Jason Duprat
“You always want to be thinking about your retirement goals. That's going to help you determine which plan to set up.” – Jason Duprat
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