I Made $400K and Still Owe $120K in Taxes

March 15th. My CPA calls with the “good news”—my S corp had its best year ever. $400K in total income between my W-2 and distributions.

Then came April 15th. Tax bill: $120,000.

I didn’t know. My CPA didn’t warn me. I was too busy running the business to think about tax strategy. But that moment—writing a six-figure check to the government—is when I realized I needed a plan, not just a tax preparer.

Your CPA Gave You a List. That’s Not a Strategy.

After that tax disaster, I did what every S corp owner does: Googled “S corp tax deductions.”

You know what I found? The same tired lists:

• Office supplies
• Business meals
• Travel expenses
• Marketing costs
• Professional development

Great. That might save me $3,000 if I’m lucky.

But here’s what none of those articles told me:
Your 401(k) plan is the single most powerful tax tool you have as an S corp owner.
When designed correctly, it can shelter $70,000+ of your income every single year.
Add catch-up contributions if you’re over 50, and that number gets even higher.

The Strategy That Actually Works

I’m not your CPA. I don’t file your taxes. But I do understand how to build tax shelter into your compensation strategy—starting with your retirement plan.

Here’s what most S corp owners don’t know:

A properly designed 401(k) plan with profit sharing can help avoid income tax on up to $70,000 plus catch-up contributions per year. That’s income you don’t pay taxes on—until much later. Maybe never if you choose Roth.

Let’s do the math on that $400K income:

• Without a plan: You owe around $120,000 in taxes.
• With a solid plan: Maybe $60K–$70K gets deferred.
• Result? Your tax bill drops by $20,000–$30,000—every single year.
• You then invest that money in a tax advantaged way (Roth or pre-tax)

Why Your CPA Didn’t Tell You This

Look, I don’t know why your CPA didn’t walk you through this. A lot of them never go there—even the good ones.

Maybe they think it’s your financial advisor’s job. Maybe they assume you already have a plan. Maybe they just don’t think about this stuff unless you ask.

But here’s what I’ve seen again and again:
Most business owners trust their CPA to bring up things like 401(k) design and tax strategy.
But they don’t.
Not unless you push for it. And even then, they usually defer to the payroll provider or someone else.

What About Vehicle Write-Offs?

Yes, your S corp can deduct car expenses—and there are multiple ways to do it. Mileage reimbursement, leasing through the business, or even buying the vehicle outright under Section 179 can all work.

Just be careful:

• It must be used primarily for business
• You need mileage logs or a solid paper trail
• And if you’re also using it personally, it has to be accounted for correctly

Can your S corp buy you a car? Technically, yes. But that’s not the tax move that saves you $25K. It’s fine as a supporting deduction. It’s not your primary strategy.

Fringe Benefits That Actually Work (And Get Missed)

Wellness Plans for C-Level Owners

You can offer health and wellness perks like:

• Gym memberships
• Massage therapy
• Nutritional counseling
• Mental health support
• Chiropractic care

But here’s the catch:
These must be offered under a written wellness plan and follow nondiscrimination rules. It takes a little setup—but it’s very doable and often overlooked.

Disclaimer: Always run this by a qualified tax pro or ERISA attorney. These perks must be structured correctly, but when done right, they can be an effective benefit without increasing taxable income.

Rent Your Home to Your Business (The Augusta Rule)

If you host offsites, planning retreats, or board meetings at your home, your S corp can rent your personal residence up to 14 days per year, and the rental income is tax-free to you under Section 280A(g)—aka the Augusta Rule.

• Your S corp deducts the rent
• You receive the payment personally
• And you don’t report it as income on your return

This works best when the rent is documented and reasonable for your zip code. In most areas, that means $250–$700 per day depending on the size and location of your home. It’s an easy $3K–$10K/year in tax-free income for owners—if your CPA knows about it.

What Actually Saves You Money: A Real Comparison for S Corp Owners

Some deductions feel exciting—like writing off a vehicle or paying for a gym membership through your business. But when you stack them next to a properly designed 401(k) plan, there’s really no comparison.

🏎️ Vehicle Write-Off

📟 Deduction: $7,000–$12,000
💸 Tax Savings: ~$2,500–$4,500
⚠️ Risk: Needs documentation; IRS watches this
👉 Reality: Feels good. Doesn’t change your life.

🧘 Wellness Plan (C-Suite Only)

📟 Deduction: $1,000–$5,000 per owner
💸 Tax Savings: ~$350–$1,750
⚠️ Risk: Must be structured properly
👉 Reality: Nice perk. Tiny impact.

🏡 Rent Your Home to Your Business (Augusta Rule)

📟 Deduction: $3,000–$10,000
💸 Tax Savings: ~$1,000–$3,500
⚠️ Risk: Requires documentation, fair market rent (typically $250–$700/day)
👉 Reality: Great side strategy. Limited scale.

🛡️ 401(k) + Profit Sharing Plan

📟 Deduction: Up to $70,000+ (plus catch-up)
💸 Tax Savings: $25,000–$30,000+
⚠️ Risk: Virtually none with proper design
👉 Reality: This is the move. Everything else is garnish.

Bottom Line: If you’re spending more time trying to write off your car than you are maxing your 401(k), you’re missing the big picture.

This Isn’t for Everyone

If you’re a solo consultant or freelancer, this isn’t for you. If you’re just trying to write off your home office, this isn’t for you either.

This is for S corp owners who:

• Have real payroll and real employees
• Are taking home $250K–$500K between salary and distributions
• Are tired of writing massive tax checks
• Want a strategy, not just compliance

If that’s you, let’s talk.

Stop Overpaying the IRS

I’ve helped dozens of S corp owners design plans that keep $25K–$50K+ from going to the government every year. Legally. Predictably. Without having to “get creative” or cross any lines.

Your CPA files your taxes.
I design the strategy that makes sure there’s less to file.

Ready to stop writing six-figure checks to the IRS?

Give me a call or shoot me a text to 619-942-4510 to get the conversations started.

Curious about what the IRS says about S Corp deductions?  Click here:

https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations

We work with employers across California—including San Diego, Los Angeles, Orange County, Sacramento, and the Bay Area.