Taxes are fun!

- You have an S-Corp and have a 401k attached to that

Let's say you had a contract of $300,000 and the default tax bill is going to be close to 40% for a California resident (-$120,000, leaving $180,000)

- contribute $60,000 to the 401k, since the S-Corp allows you to do both employee contributions ($20,000) and the separate employer contribution maximum ($40,000, when your employers have various matching schemes there actually is a limit to what they could do, which practically none of them do.) Note, that self-directed 401k's contribution limits are also dictated by your revenue, of which 20% of it can be contributed up to the dollar maximums, hence the simple example of $300,000 as 20% of the revenue is $60,000 - the current total contribution maximum for the year

This reduces the remaining taxable income to $240,000, with the governments only getting $91,000

- Next step is to double dip, borrow against the 401k. You can borrow half up to $50,000. If this was the first year of having a 401k then that would be $30,000. Otherwise borrow the entire $50,000

- Donate that $50,000 to charity. There are two or three types you can control yourself. At these proportions of your remaining taxable income, the deduction is 1:1 and the same. The same money, two deductions.

- This brings your taxable income down to $190,000, with the governments only privy to $69,000, and now you have dry powder in your non-profits to donate compliantly.

As you might notice, you also have less discretionary income, for now. If you really want to go down this rabbit hole, the point is to follow the government's incentive model of pursuing certain kinds of transactions, and your failure to do so results in the remainder being taxed. The government incentivizes spending - the movement of money at a high velocity - and penalizes and cripples saving in multiple ways, velocity is more useful for the economy as well. Said another way, the goal is to not let the government have any of it, but there are really good state-approved rationales for that which have nothing to do with having an opinion on its spending habits or a misguided sense of "duty". The roads and schools you care about are still going to be built from other capital sources the state figures out, or property taxes they already levy.

so $69,000 is still too much to send over.

The S-Corp likely has QBI qualified income, and that's another 20% tax deduction

But lets fast forward, your overhead costs and business expenses are another 1:1 tax deduction, and if you have any lines of credit or external money (savings) that you spend on the overhead costs and business expenses then you can spend more than you have made and the tax can go to $0 and you may have losses.

Your net operating losses carryforward to future tax years. And also your charitable deductions are not applied if you have no income and those carryforward for several years as well. Starting your next tax year already in a privileged position.

Right, but now you have no money for the house, car, vacation and consumptive spending, what's the point? Again, this is for now. What you can do is grow your 401k tax free and invest in nearly anything. You can grow your non-profit nearly or totally tax free and invest in nearly anything as well as donate, just like you could if you were using those same funds as an individual. These two vehicles can vastly exceed the financial firepower in your own name.

For your goal of having money for the house, car, vacation and consumptive spending: hopefully the business continues growing. At your discretion you can absolutely spend on consumptive things you like. But ideally you can sell shares in the future and get the long term capital gains tax rate, which is way lower than income. Or you can convert to a C-Corp and sell shares tax free under the QSBS tax rate, if qualified. (QSBS is distinct from QBI, and also California state tax would not be nullified) and in those years you are still rolling over tax deductions from the other years to reduce any outstanding income you recognized in your consumptive spending. You can even convert balances from your 401k to a Roth 401k those years tax free, because the prior year deductions can push that income tax event down to zero as well.

YMMV talk to a CPA to confirm or learn relevant realities.