11-29-2017, 06:09 PM
(11-29-2017, 03:31 PM)Belsnickel Wrote: 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.
Yes, S-Corps can CHOOSE to file as a C-Corp if it's cheaper. But we're not talking about different rates. There is no "S-Corp" rate, you either pass-thru or file as a C-Corp. Although there's nominal state taxes on S-Corps, which is probably different from C-Corps. I guess if you want to get technical, they've created a new taxable entity (or however you want to call it) that is taxed neither purely as an individual nor a corporation (a special one, albeit far the most common, at that).
Sounds like the deduction is a real mess. Don't believe they've defined the tests to qualify for the special treatment or how much gets the favorable rate vs. ordinary income on "wages", but I'm guessing the accountants and lawyer are going to figure out how to get it.
You're correct they're lowering the corporate rate to 20%.
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