Unlocking Six-Figure Tax Savings for a Venture Capital Partner

The Challenge: High Earnings, But a Tax-Inefficient Compensation Model

Natalie’s financial trajectory was strong, but her compensation structure wasn’t keeping up. She was drawing a high W-2 salary while leaving significant tax-saving opportunities untapped. Her personal financial setup—and her company’s default policies—created roadblocks to maximizing take-home income and structuring her finances for long-term efficiency.

Key issues included:

• Full Exposure to Payroll Taxes: Every dollar of Natalie’s $1.5M salary was subject to full Medicare and Social Security taxation, despite the capped benefits.
• No PTET Advantage: As a W-2 employee, she had no pathway to leverage the Pass-Through Entity Tax (PTET) workaround to deduct state taxes federally.
• Potential Employer Pushback: Her finance team was hesitant about alternative structures, misinformed about the deductibility and compliance mechanics of 1099 or S-Corp arrangements.
• Blurred Liability Lines: With no entity separation between her and her partner Alex, they faced heightened audit exposure and lacked operational clarity across income sources.

Gelt’s Strategic Approach: Restructuring Personal Income for Long-Term Efficiency

Gelt facilitated a high-impact strategy session to evaluate structural friction, educate around implementation pathways, and quantify real-world savings. The result: a tax-efficient roadmap designed to minimize liability, increase deductible opportunities, and preserve employer alignment—without creating unnecessary complexity.

Executive Restructuring for Major Tax Savings

Proposed Shift: Transition Natalie’s income from W-2 to 1099 compensation through a personal S-Corp.

Estimated Benefit:

• $100,000+ in Annual Tax Savings
  
  • PTET benefits of $70K–$80K via federal deductibility of state taxes
    
  • Payroll tax savings of $20K–$30K by converting salary into partial distributions
    

Structural Enhancements:

• Recommended that both Natalie and Alex operate separate S-Corps for audit risk mitigation and clearer liability segmentation
  
• Clarified that the employer's tax and compensation cost structure would remain unchanged, preserving deductibility and benefits flow
  

Health Insurance & Benefits

• Natalie could use COBRA for up to 18 months before switching to marketplace coverage
  
• Premiums would be deductible via S-Corp payroll configuration, keeping net costs tax-advantaged
  

Leveraging the Augusta Rule & Home Office Deductions

Gelt introduced complementary strategies to deepen tax efficiency:

• Augusta Rule: Allows Natalie to rent her home to her S-Corp for business use up to 14 days annually
  
  • Suggested rate: $1,500–$3,000/day, benchmarked against luxury meeting venues
    
  • Required documentation: rental agreements, calendar entries, and internal correspondence
    
• Home Office Optimization: Alex’s existing 6% home office deduction could be enhanced with refined documentation and possible reallocation
  

We thought our taxes were just the cost of a high salary. Gelt helped us realize how much control we actually had—and showed us how to turn structure into strategy.

— Natalie, Tech Executive

Results & Implementation Roadmap: Tax Savings and Flexibility

Natalie and Alex are now set up to:

• Save ~$100K annually through S-Corp structuring and PTET participation
  
• Reduce audit and liability risk with separate entities
  
• Maintain employer alignment with no change in cost or deductibility
  
• Leverage additional deductions via the Augusta Rule and optimized home office setup
  
• Build a scalable foundation for future income and planning needs

Conclusion: Structure That Supports Strategic Earning

By rethinking compensation, separating business activity, and unlocking overlooked deductions, Natalie and Alex transformed their financial foundation without disrupting employer relationships or overcomplicating compliance.

Gelt’s strategic guidance didn’t just reduce their tax burden — it gave them clarity, control, and a structure built to evolve with their lives.