Let’s talk about when paying yourself a higher salary can actually save you money. Small business owners love S corporations. There are many reasons for this, the biggest one being that it is a great way to lower your self-employment tax. Income from sole-proprietors and partnerships is generally subject to a 15.3% self-employment tax (on top of the income tax), while income from an S corporation is not. There is a catch, however: an active owner of an S corporation must pay themselves a reasonable salary which is subject to the same 15.3% tax rate. While it is not possible to eliminate employment taxes completely using an S corporation, it is a great way to drastically reduce the amount owed each year. Our clients save thousands of dollars every year (individually) using this strategy.