The Business Owner Who Deferred $400,000 in Taxable Income — Legally
Case Study Summary
A profitable S-corporation owner was writing large checks to the IRS every April. His advisor introduced him to a combination of retirement plan strategies that allowed him to defer hundreds of thousands of dollars in income each year — dramatically reducing his current-year tax bill while building long-term wealth.
Retirement Plans as Tax Strategy
For business owners, retirement plans are among the most powerful and underutilized tools for reducing taxable income. Beyond the standard 401(k), several plan structures allow for significantly higher contributions — and therefore significantly larger deductions — for business owners with the right profile.
Plan Types That Go Beyond the 401(k)
Defined benefit plans, cash balance plans, and SEP-IRAs can allow business owners to defer far more income than a standard 401(k). The right structure depends on the owner's age, income level, employee headcount, and long-term financial goals. For some business owners, annual plan contributions in excess of $200,000 or more may be possible.
Coordination With Business Structure
The most effective tax deferral strategies are closely coordinated with entity selection, compensation planning, and overall financial planning. Changes to business structure or ownership can dramatically affect which strategies are available and how much can be contributed each year.
Who This Strategy Is Best For
- ✓Profitable business owners and entrepreneurs
- ✓S-corporation or LLC owners with consistent income
- ✓Self-employed professionals looking to reduce current-year taxes
- ✓Business owners approaching retirement who want to accelerate savings
- ✓Anyone looking to convert current-year tax liability into future retirement wealth
Explore Your Strategy
Speak directly with Rajiv Rebello to see how this strategy fits into your comprehensive tax plan.