Priya Raman

A profitable Schedule C sole proprietor pays self-employment tax on the entire net profit. Electing S-corporation status lets the owner take a reasonable wage subject to FICA and the remaining profit as distributions that escape the 15.3% SE/FICA band — a recurring annual saving once the structure is in place. The election is not free: it adds payroll filings, plan-administration cost, and reasonable-compensation exposure under Rev. Rul. 74-44, and the wage must be defensible. The analysis is worth running whenever net Schedule C profit is large enough that the FICA saving on the distribution band clears the added compliance cost.

An HSA is the only account with a triple tax benefit: contributions are deductible, growth is tax-free, and qualified medical withdrawals are tax-free. For a client on a high-deductible plan, funding to the limit is among the most efficient deductions available, and unlike an FSA the balance carries forward and can be invested. Contributions for the year can be made up to the filing deadline, so the window stays open past Dec 31.

A self-employed taxpayer who uses part of the home regularly and exclusively for business can deduct that portion of home costs under §280A. The simplified method ($5/sq ft, up to $1,500) is low-documentation; the actual-expense method allocates real costs and depreciation by business-use percentage and is often larger. The exclusive-use test is the common failure point and should be confirmed before claiming.