spb/ultra-sharp-agent-skills Public

1<!--2Author: Simon-Pierre Boucher3Contact: contact@spboucher.ai4-->56# Reference — Business Tax Optimization (US & Canada)78## Contents9- US: S-corp vs sole proprietorship worked math10- US: retirement plan comparison11- US: home office and vehicle deductions done right12- Canada: salary vs dividends worked math13- Canada: passive-income SBD grind table14- Canada: common CCA classes15- Year-end checklist (both countries)16- Gotchas1718## US: S-corp vs sole proprietorship worked math1920Assumptions: single owner, all profit is SE income, SS wage base not exceeded, ignoring state tax and the QBI interaction (model those before deciding). SE tax ≈ 15.3% on 92.35% of net profit; S-corp pays 15.3% FICA only on salary.2122| Net profit | Sole prop SE tax | S-corp (reasonable salary) | FICA on salary | Payroll/admin cost | Approx. annual saving |23|---|---|---|---|---|---|24| $60,000 | ≈ $8,478 | salary $45,000 | ≈ $6,885 | $1,500 | ≈ $93 — **not worth it** |25| $120,000 | ≈ $16,955 | salary $70,000 | ≈ $10,710 | $1,500 | ≈ **$4,745** |26| $200,000 | ≈ $23,000 (SS capped) | salary $90,000 | ≈ $13,770 | $1,500 | ≈ **$7,700** |2728Break-even sits around $50–80k profit. "Reasonable salary" = what you'd pay a stranger for the same role — document comparables (BLS data, job postings).2930Election deadline: Form 2553 by March 15 for the election to apply to the current calendar year (late-election relief exists but don't plan on it).3132## US: retirement plan comparison3334| Plan | 2026 shelter potential | Best for |35|---|---|---|36| Solo 401(k) | $24,500 deferral + ~25% of compensation employer piece | Owner-only, wants max shelter at moderate income |37| SEP-IRA | ~25% of compensation only | Simplicity; no employee deferral piece |38| Traditional IRA | $7,500 | Fallback only |3940At $70,000 S-corp salary: Solo 401(k) ≈ $24,500 + $17,500 = **$42,000 sheltered** vs SEP ≈ $17,500. The S-corp salary choice directly caps the employer piece — factor it into the salary decision.4142## US: home office and vehicle deductions done right4344**Home office** (self-employed; exclusive + regular use required):45- Simplified method: $5/sq ft up to 300 sq ft = max $1,500 — zero recordkeeping beyond square footage.46- Actual method: business-use % × (rent or depreciation, utilities, insurance, repairs). A 150 sq ft office in a 1,500 sq ft home = 10% of eligible costs — usually beats simplified once annual home costs exceed ~$15,000, but adds depreciation-recapture complexity for owners.4748**Vehicle:**49- Standard mileage rate (verify the current rate on irs.gov) vs actual expenses × business-use % — pick per vehicle, but standard-mileage must be chosen in year 1 to keep the option.50- The log is the deduction: date, destination, purpose, miles, kept contemporaneously. Commuting from home to a regular workplace is never business mileage.5152## Canada: salary vs dividends worked math5354CCPC in a ~9%-federal SBD province, owner needs $80,000 pre-personal-tax cash, corporate pre-tax profit $150,000. Illustrative combined rates — model the actual province.5556**All salary ($80,000):** corporation deducts it (saves ~12% combined corporate ≈ $9,600 on that slice); owner pays personal tax + CPP (~$4,000 employee+employer, half deductible); owner earns $14,400 RRSP room.5758**All dividends ($80,000 non-eligible):** corporation first pays ~12% corporate tax, dividends carry a gross-up + credit designed so the combined bill lands within ~1–2% of the salary route (integration). No CPP cost — and no CPP benefit, **zero RRSP room**.5960**Decision drivers, not totals:** RRSP room (salary only), CPP disability/retirement value vs its cost, provincial integration gaps, income smoothing (dividends flexible), mortgage-qualification preferences. Default blended pattern: salary to the RRSP-max level (≈ $187,800 for full room — or lower per cash reality), dividends for the remainder.6162## Canada: passive-income SBD grind table6364SBD limit reduction = 5 × (passive investment income − $50,000).6566| Corporate passive income | SBD limit remaining |67|---|---|68| ≤ $50,000 | $500,000 |69| $75,000 | $375,000 |70| $100,000 | $250,000 |71| $150,000+ | $0 — all active income at the general rate (~15% federal) |7273Each $1 of passive income above $50k costs $5 of limit ≈ up to ~$0.30 extra corporate tax. Mitigations: pay salary/dividends out and invest personally (RRSP/TFSA), buy back active capacity, corporate-class funds deferring income realization.7475## Canada: common CCA classes7677Verify class assignments and rates on canada.ca — these are the frequent ones:7879| Class | Rate | Typical assets |80|---|---|---|81| 8 | 20% | Furniture, equipment, tools ≥ $500 |82| 10 / 10.1 | 30% | Vehicles (10.1 caps luxury-car cost — no terminal loss) |83| 12 | 100% | Small tools < $500, some software |84| 50 | 55% | Computer hardware |85| 14.1 | 5% | Goodwill and other intangibles |8687Mechanics: declining balance on the class pool; the half-year rule limits the first-year claim to half the addition (accelerated first-year rules have varied — verify current status); CCA is optional each year — skipping it in loss years preserves the pool for profitable ones.8889## Year-end checklist (both countries)90911. Project profit to Dec 31 while there is still time to act (start in November).922. US: confirm reasonable salary run through payroll; fund Solo 401(k) deferral by Dec 31; place equipment in service before year-end if deducting this year; Q4 estimated payment Jan 15.933. Canada: set salary/bonus by Dec 31 (bonus accrued now, payable within 180 days); check passive income vs $50k; decide this year's CCA claim; confirm GST/HST ITCs all captured.944. Both: document the business purpose of each move in writing, dated now — not at audit time.9596## Gotchas9798- **Unreasonably low S-corp salary** is the IRS's top S-corp audit issue; distributions reclassified as wages arrive with penalties and interest.99- **S-corp reduces the retirement base:** employer 401(k)/SEP contributions key off salary, not distributions — aggressive salary minimization can cost more shelter than it saves in FICA.100- **Integration is provincial:** salary-vs-dividend "neutrality" varies ±2-3% by province and income type — always compute, never assume.101- **Bonus accrual trap (Canada):** an accrued bonus unpaid within 180 days of year-end is denied as a deduction until paid.102- **CCA is optional per year** — claiming it in a loss year wastes it; carry the pool forward instead.103- **GST/HST on the $30,000 threshold:** registration is mandatory from the quarter you cross it — late registration means remitting tax you never collected.104- **Personal expenses through the corporation** (Canada) trigger shareholder-benefit inclusion at full rates with no corporate deduction — the worst of both worlds, plus penalties.105- **Paper trails beat intentions:** logs, minutes, and comparables written contemporaneously are what survive an audit.106