You made money. Good. So why does it feel like the IRS made more?
If you're an HVAC contractor pulling in $150K, $200K, $250K a year and watching a massive tax bill hit every April, you're not alone. You're also not helpless.
The problem isn't that you didn't work hard enough. The problem is that most contractors are running their business through the wrong entity structure — and leaving tens of thousands on the table every single year.
The Hidden Tax Drain You Probably Don't Know About
Here's the part your last tax preparer probably didn't explain clearly: self-employment tax.
When you're a sole proprietor or single-member LLC, every dollar of net profit gets hit with 15.3% self-employment tax — before income tax even enters the picture.
Let's run the math on a $200,000 net profit year:
- $200,000 net profit
- × 15.3% self-employment tax = $30,600
- That's on top of your income tax
You didn't mess up. You didn't cheat. You just didn't know there's a legal way to split that profit — so only the portion you call "salary" gets hit with self-employment tax.
