There are categories of business entities responsible for paying shareholder-employee reasonable compensation. An S Corporation[1] is one such corporation. An S Corporation is defined as a type of corporation that elects to be taxed under a section of the U.S. Internal Revenue Code. “S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made to the shareholder-employee” (IRS.gov, “S Corporation Compensation and Medical Insurance Issues,” 8/31/2013). The shareholder cannot receive an amount of S Corporation reasonable compensation that exceeds the amount the shareholder receives either directly or indirectly.
The Augusta Rule Explained: Tax-Free Home Rentals for Your Business
The Augusta Rule: Rent Your Home to Your Business—Tax-Free! It’s true—you can rent your home to your business for up to 14 days a year and not pay taxes on the rental income. This unique tax strategy, known as the Augusta Rule, allows business owners to convert personal living space into a tax-deductible expense, effectively … Read more