Electing S Corp tax status as an LLC probably came up in your research.
You dont have to pay FICA Medicare and Social Security taxes on distributions.
That means you could theoretically shrink that check you have to write to the IRS.
Be wary, though.
Diminishing how much you pay into the system lowers your benefits later in life.
If you have a disabled dependent, youre going to want to pay extra attention.
Lowering the amount of Social Security taxes you pay could cut the benefits they receive, too.
Namely, the Disabled Adult Child benefit (DAC).
What is the Disabled Adult Child benefit?
Substantial earnings are $1,550 monthly for most disabilities in 2024.
This year, it is $2,590 if the person is blind.
What are the benefits of DAC?
In 2024, the maximum SSI payment for an individual is $943 per month.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
What rules do DAC recipients have to follow?
To receive government benefits, you have to accept certain restrictions on your daily life.
DAC recipients have their own nuanced set of rules.
Certain circumstances allow them to get married or pretend like they got married without filing paperwork with the state.
However, entering a disallowed legalmarriage will get them kicked off DACbenefits for life.
Even if theres later a divorce, or they later become widowed.
Each month the disabled individual works over the substantial income limit will count toward the nine-month maximum.
Experts dont recommend flirting close to the edge, though.
Many individuals who will be on the DAC are considered for guardianship, butguardianshipis not always the best fit.
Someone under guardianship cannot own a business and cannot take advantage of this opportunity.
What are other circumstances that would lower my FICA taxes?
This can reduce your taxable income by a significant amount, but it also lowers your FICA tax base.
Is it better to pay FICA taxes or invest?
In most situations, its ideal to do both.
Its not so much an either/or situation so much as one that calls for balance.
A certified financial professional with experience in disability finance issues can help you find that balance.
Think of the childs DAC as a lifetime pension income, explains Yoder.
Parents own financial planning continues to be important to the security of the younger person.
This includes comparing tax andSocial Securityfiling strategies.
Will Social Security even be around for my child?
The most significant cuts that legislators are discussing are to standard retirement benefits, she said.
The disability programs are in their own world.
If anything, I see the federal legislators talking positively about expanding benefits for adults with disabilities.
So, I shouldnt restructure to an S Corp, then?
However, tailor your tax strategy and business decisions to your situation with the help of a qualified professional.
The income and resources of each DAC and disability recipient are unique, Yoder said.
Their needs are unique, and the input they receive from their families vary greatly.
Pittsburgh-based writer Brynne Conroy is the founder of Femme Frugality and the author of The Feminist Financial Handbook.
She is a regular contributor to The Penny Hoarder.
When you log into your bank account, how do your savings look?
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?