Yes, S-Corps are eligible for the 20% Qualified Business Income deduction. The same income thresholds apply ($170,050 for single filers and $340,100 for joint filers in 2025). Above those thresholds, limitations based on W-2 wages and qualified property start to phase in. Actually, this is where S-Corps can have an advantage over sole props for high earners. Since you're paying yourself a W-2 salary, that can help you qualify for larger QBI deductions if you're over the income threshold. It's a bit complicated but basically your W-2 wages to yourself can help satisfy the wage limitation tests.

Thank you for mentioning QBI! I didn't even know about that deduction. Do both of my businesses qualify for that? And would I apply it to each Schedule C separately?

Yes, both of your businesses should qualify for the QBI deduction as they're both reported on Schedule C. The deduction is actually calculated on your total qualified business income across all qualifying businesses, not on each Schedule C separately. The basic calculation is 20% of your net business income (after expenses), but there are income thresholds where it starts to phase out or get more complicated (over $170,700 for single filers in 2024, which doesn't sound like it applies to you). This deduction alone could significantly reduce what you owe, possibly explaining the high amount you saw on the first website you tried.

Which tax software did you use? I tried [popular tax software] and it didn't explain anything about allocating home office expenses between multiple businesses.

That's a really important point I hadn't considered! So if I did electrical work throughout the house but my office is only 15% of the total square footage, I would only be able to deduct 15% of that electrical work cost? And then the safe harbor threshold would apply to just that 15% portion?

Yes, exactly right. If the electrical work benefited the entire house and your office is 15% of the total square footage, you would only be able to deduct 15% of the total electrical cost. The safe harbor threshold would then apply to that 15% portion, not the entire bill. For example, if your total electrical work was $8,000, your business portion would be $1,200 (15% of $8,000). Since that $1,200 is well under the $10,000 safe harbor threshold, you could potentially expense that amount immediately instead of depreciating it, assuming you make the proper election on your tax return.

Keep EVERYTHING. All invoices, contracts, before/after photos, and a written timeline of when you decided to do each project. I got audited in 2023 for 2022 taxes and the IRS was very interested in the timing of my home improvements to determine if they should have been considered one project or separate ones.

Thanks for the suggestion! My health insurance premium did actually increase slightly during this period, but the pretax deduction amount seems correct. I'll definitely double-check my state withholding though - I hadn't even thought to look at that separately! I'm in Minnesota, and now that you mention it, the state withholding does look a bit different on the new paystubs compared to federal. I'll compare the percentages to make sure everything adds up.

This is good advice. I work in HR and I can tell you we WANT to know about these issues. Sometimes during system migrations, default settings get applied instead of employee-specific ones. We can't fix what we don't know about!

Dude, Texas has none of that garbage. No state income tax and LLC filing is like $300 one time. So many California business owners moving here for that reason.