I'm sole member of an LLC. YTD, I've drawn no wage. I've simply taken draws on the pass-through income. Currently it's a pass-through entity and no an S-corp election. I'm a consultant.
This LLC was created effective Jan 1, 2018.
My married-filed-jointly AGI will be less than $315K in 2018. My net business income will be around $200k. I have no other sources of income, and my spouse does not work.
I am debating paying myself W-2 income effective immediately for remainder of year and doing an S-Corp election (late) effective Jan 1, 2018.
However, if I'm entitled to 20% small business deduction on the pass-through income, that seems to more than offset the SE tax that would be saved if I did W-2 salary on an S-Corp election.
What is the gain from paying myself W-2 salary, and not having that income count as the 20% deduction?
Am I understanding this situation right?
Thanks for clarifying.
This LLC was created effective Jan 1, 2018.
My married-filed-jointly AGI will be less than $315K in 2018. My net business income will be around $200k. I have no other sources of income, and my spouse does not work.
I am debating paying myself W-2 income effective immediately for remainder of year and doing an S-Corp election (late) effective Jan 1, 2018.
However, if I'm entitled to 20% small business deduction on the pass-through income, that seems to more than offset the SE tax that would be saved if I did W-2 salary on an S-Corp election.
What is the gain from paying myself W-2 salary, and not having that income count as the 20% deduction?
Am I understanding this situation right?
Thanks for clarifying.