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.

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.

That's so helpful to know about! Does this penalty abatement apply even if I've been claiming exempt incorrectly on my W-4? And would I need to specifically request this through a phone call or is it something I'd note when filing the back returns?

The First Time Penalty Abatement can still apply even if you claimed exempt incorrectly on your W-4. The IRS looks at whether you've had penalties in the prior 3 tax years, not how you filled out your withholding forms. You typically request it after you file all your returns and receive a bill from the IRS that includes penalties. You can request it by phone, mail, or sometimes through your online account. The easiest method is usually to call the IRS after you receive a bill and specifically ask for "First Time Penalty Abatement" - just be prepared to explain that you've had a clean compliance history before this.

Thank you! I had no idea about potentially qualifying for Head of Household status - I thought since I'm not married I'd just remain "Single" for filing status. Are there specific requirements for Head of Household that I should know about?

To qualify for Head of Household, you need to be unmarried at the end of the year, pay more than half the cost of keeping up a home for the year, and have a qualifying person (like your child) living with you for more than half the year. The benefit is substantial - the tax brackets are more favorable than single status, and you'll get a larger standard deduction ($20,800 for 2023 vs $13,850 for single filers). When you update your W-4, check the filing status box for Head of Household to have the correct amount withheld going forward.