For small business owners in Lake Norman, North Carolina, the S corporation election can unlock powerful tax savings—if used correctly. At Polaris Tax & Accounting, we don’t just file your return and wish you luck. We implement proactive strategies that lower your tax burden and keep your business compliant with both federal and North Carolina laws. This blog outlines real-world, field-tested tactics to help S corporation owners in the Lake Norman area keep more of their income.

Why Electing S Corporation Status Isn’t Enough

Most Lake Norman entrepreneurs hear about the S corp election from a friend or social media and assume it’s a magic bullet. But electing S corp status is only the starting point. The real savings come from what you do after you elect—how you pay yourself, how you document expenses, and how you work with a qualified tax advisor.

1. Reasonable Salary + Distributions: The Classic S Corp Split

This is the foundational strategy that makes S corporations appealing. Instead of paying self-employment tax (15.3%) on 100% of your profits, you pay yourself a reasonable salary and take the rest as distributions, which are not subject to payroll tax.

Key Tip for Lake Norman Businesses: Salaries must be reasonable based on your role and industry. Polaris benchmarks wages against real data from landscaping companies, real estate agents, service providers, and others common in the area.

2. Reimbursements Through an Accountable Plan

If you use your personal vehicle, home office, or cellphone for business, your S corp can reimburse you tax-free—as long as it’s documented properly under an Accountable Plan.

  • Mileage: 67 cents per mile in 2024
  • Home office: Based on actual expenses and square footage
  • Cellphone: Proportional to business use

These reimbursements are fully deductible to your S corp and non-taxable to you.

3. Rent Your Home to Your Business (The Augusta Rule)

If your Lake Norman home is used for business events—like board meetings, employee trainings, or client strategy days—you may qualify to rent it to your S corp up to 14 days per year tax-free under IRC Section 280A(g), also known as the Augusta Rule.

Polaris helps clients document this properly with:

  • Agendas
  • Market-rate comparisons
  • Meeting minutes

4. Retirement Contributions: Use the S Corp to Supercharge Your Savings

S corporations allow flexible retirement strategies:

  • Solo 401(k): Salary deferral up to $23,000 (2024), plus 25% of W-2 wages as employer contribution
  • SEP IRA: Up to 25% of compensation (but no salary deferral component)

Pro Tip: The Solo 401(k) typically offers more value but requires setup before year-end.

5. Hire Your Kids (And Save on Payroll Taxes)

Have children under age 18? Consider hiring them to help in your Lake Norman-based business. While S corps do require FICA tax on children’s wages (unlike sole proprietorships), you still get a full deduction for their wages, and your child pays no federal tax if under the standard deduction ($13,850 in 2024).

Make sure:

  • The work is age-appropriate
  • Hours and pay are reasonable
  • You issue a W-2 and keep time logs

6. Health Insurance and HSAs: Play It Smart

An S corp can pay for your health insurance, but it needs to be reported properly on your W-2 to avoid tax penalties. Add the premium to box 1 of your W-2, then deduct it on your personal return. You can also contribute to a Health Savings Account (HSA) if you have a qualifying plan.

2024 HSA Limits:

  • $4,150 individual
  • $8,300 family
  • +$1,000 catch-up (age 55+)

7. Don’t Forget North Carolina Compliance

The state of North Carolina treats S corporations similarly to the IRS—but you must still file an annual NC S Corporation return (Form CD-401S), pay any applicable franchise tax, and maintain a valid registered agent. Polaris handles all this so you don’t get blindsided.

Avalanche Effect: Related Resources

Make sure to review our other Lake Norman business tax strategy blogs:

Want Help Running Your S Corp Smarter?

If you own a business in Lake Norman and want to make your S corporation work for you instead of the IRS, schedule a strategy session with Polaris Tax & Accounting. We’re not just another CPA firm—we specialize in advanced tax reduction strategies and S corp optimization.

Book Your Strategy Session →