Hi,
I know as a sole proprietor LLC that if I make a "net income" of $100K then this is the amount that I'm responsible in paying self-employment tax (15.3%) on; so my SE tax would be $15,300.
1. However, if I was a S-Corp and I paid myself a salary of $40K then this would drop my "net income" down to $60K; so I would only pay self-employment tax (15.3%) on this amount, which would come out to $9,180; right?
2. So does this mean that I would be able to list my $40K salary as a business expense because this is how I would lower my "net income" amount?
3. But since I'm an S-Corp, would I need to pay payroll taxes (7.65%) on my $40K [$40K - ($40K * 0.765) = $3,060] salary amount?
If so, then this would make my total tax amount be $12,240 [$9,180 + $3,060], so in the end a S-Corp would give me a tax benefit of $3,060 [$15,300 - $12,240]?
Thank you!
