Originally Posted by OldJack
I guess I have just not been explaining it very good. You must treat the S-corp as a separate individual not related to you. Yes, you have the facts straight that you have to pay your home mortgage out of your personal funds, but you are not recognizing that the interest on your home mortgage is your personal mortgage interest and not your S-corps interest. You would deduct the mortgage interest paid personally on your 1040 Sch-A. If you loaned the S-corp money then you would have a note signed by the S-corp and the S-corp would pay you interest and have an interest deduction (from the note debt) on the S-corp books with you reporting taxable interest income, from the note, on your 1040 Sch-B.
Do not confuse the S-corp and the sole-proprietor entity where if the sole-proprietor business used the mortgage proceeds the interest may be deducted by the sole-proprietorship on the 1040 Sch-C as business interest. Remember, an S-corp is a separate individual and does not owe the mortgage company and therefore cannot deduct the mortgage interest.
S-corp distributions are not taxed as the S-corps total yearly "profit" is passed through to your 1040 Sch-E and taxed. So, take distributions as much as you wish, and for whatever purpose, as long as you have cumulative profits available to take the S-corp distributions and they will be tax-free to you and not deductible by the S-corp.
I don't know now. The CPA I went and spoke with has me on another direction here. So S-Corp distributions are just the company loaning me money more or less, and actually show up as profit.
The CPA I spoke with told me that those distributions would have a tax on it of just Federal. No SS, or Medicare. Then at the end of the year, I either had the option of taking my profits as distributions, or leaving it as profits. I'm guessing he just turns his clients in as distributions. I made this clear. I told him I wanted to pay the lowest tax possible, and this is what he proposed. Initially I went in wanting to be a C-Corp. If this is the case that I'd have to turn my year profits in as a salary, then there is something wrong here. And obviously, I am confused. And should this be the case, I'd much rather go with the C-Corp, and take the 30% overall corporate tax, and the measley 15% I'd try to stay in personal, plus 15.3% payroll for a total of 30.3% personal with a lower amount, instead of taking a full salary in a S-Corp which would put me in the 33% (or higher) Federal 15.3% Payroll, and no Florida tax for a total of 48.3% (or higher).
Aside from deductions, ect, what's the overall tax saver on $100,000?