Tax Tips for Business Owners: Can You Save More With A C Corp or S Corp Election?

April 10, 2018

For decades, CPAs have had a simple piece of tax advice for business owners: Take the small business – or S Corp – election instead of C Corp.

But now, the new tax code is shaking up such long-held assumptions. As a business owner, could choosing C Corp be right for you?

The S Corp election was introduced in 1958 to help entrepreneurs avoid double taxation. Filing as a “C” Corporation meant the company would pay taxes on profits, and the business owner would personally pay taxes on any profits taken out of the company as well.

But what happens now that the difference between individual and corporate tax rates is so small? The highest individual tax rate is 37%. Compare that to the C Corporation (C Corp) tax rate of 21%, and the highest dividend rate of 20% (total of 41%), and the C Corp doesn’t sound too bad!

Of course, C Corps must still pay state taxes. But the tax deduction on Schedule A of an individual return is limited to $10,000 per year, so the C Corp may be able to utilize a deduction that an S Corp owner cannot – saving you money.

To find out which option is right for you, contact your CPA.

Bio: Corry Hunter, CPA, joined Osborne Rincon CPAs in January 2011. After graduating from La Quinta High School, Corry served in the U.S. Army for four years before attending College of Desert and eventually graduating from USC.

Contact: For more information call Osborne Rincon CPAs at 760-777-9805 or www.OsborneRincon.com

Author: Corry Hunter, CPA
Company: Osborne Rincon CPAs

Last modified: April 10, 2018

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