11-29-2017, 03:31 PM
(11-29-2017, 02:46 PM)JustWinBaby Wrote: I thought all S-corps were pass-thru? Unless they converted from a C-corp, then there's some recapture and tax on passive income. There are a lot of reasons why the publicly traded C-corps wouldn't convert.
As I understand it, this tax plan somehow treats income from S-corps differently, capping it at 25% (or is it 20%?) whereas before it would be potentially hit a higher marginal bracket. What I'm not understanding is if the C-corp rate is changing.
It's been a while since my income tax class (corporate taxes I focused on were indirect, so property, sales, VAT, etc.) but IIRC S-corps could go either way.
As for the corporate taxes being lowered, all corporate rates are being lowered to 20%, but my understanding is that if you are receiving income via the pass through method, the top rate for your individual taxes will be 25% on that income in the House plan, but the Senate plan would allow you to deduct 17.4% of that income instead. Both disallow this break for folks like accountants and lawyers.