Characteristics and Income Taxation of Business Entities - Special Taxes
Accumulated Earnings Tax (AET)
- Designed to encourage corporations to pay dividends
- Corporations can accumulate $250,000 without establishing a business need
- Tax is in addition to normal corporate tax
- If the corporation retains earnings and profits to avoid income tax to its shareholders and increase share price, it is subject to an annual AET penalty equal to 15% of its accumulated taxable income for the year
Dividend Received Deduction
- "Corporate shareholders" are allowed an income exclusion for dividends received from another corporation
- 100% exclusion if ownership in the dividend paying firm is 80% or greater
- 80% exclusion if ownership in the dividend paying firm is between 20 to 80%
- 70% exclusion if ownership in the dividend paying is 20% or less
Corporate Tax Rates
|If Taxable Income Is||The Tax Is:|
|Not over $50,000||15% of the taxable income|
|Over $50,000||but not over $75,000||$7,500 plus||25% of the amount over $50,000|
|Over $75,000||but not over $100,000||$13,750 plus||34% of the amount over $75,000|
|Over $100,000||but not over $335,000||$22,250 plus||39% of the amount over $100,000|
|Over $335,000||but not over $10,000,000||$113,900 plus||34% of the amount over $335,000|
|Over $10,000,000||but not over $15,000,000||$3,400,000 plus||35% of the amount over $10,000,000|
|Over $15,000,000||but not over $18,333,333||$5,150,000 plus||38% of the amount over $15,000,000|
|Over 18,333,333||35% of the taxable income|
|Qualified personal service corporations are taxed at a flat rate of 35% of taxable income|
TaxesDouble taxation refers to income taxes being imposed twice on the same source of earned income.
EconomicsA corporate tax is a tax levied on the profits a corporation generates.
Investing BasicsLearn how dividends are taxed by the IRS, and understand the different types of dividend income as well as the capital gains tax rates.
Investing BasicsDividends are taxed differently than other investment income. Here are some strategies to help lower taxes on dividends.
Investing BasicsDividend paying companies are attractive in a low interest rate environment, but income seeking investors have to be careful of the potential tax hit.
ProfessionalsCFA Level 1 - Income Tax Terminology. Learn the difference between financial and taxable income. Covers basic tax terminology, including types of differences.
TaxesTaxable income is the net of gross income and allowable deductions.
TaxesIndividuals in the 25% or higher tax bracket pay a 20% tax on long-term capital gains.
A rule that allows corporations to subtract dividends received ...
The percentage at which an individual or corporation is taxed. ...
The average rate at which an individual or corporation is taxed. ...
The amount a Canadian resident applies against their tax owing ...
The amount of income that is used to calculate an individual's ...
A special corporate tax account which gives shareholders designated ...
Read about the effective tax rate for individuals when compared with the effective tax rate for corporations, including how ... Read Answer >>
The U.S. tax code gives similar treatment to dividends and capital gains, although this will change slightly in 2013. Currently, ... Read Answer >>
Learn how the marginal tax rate is a progressive tax that takes a higher percentage of income tax from high-income earners ... Read Answer >>
Learn the difference between state income tax and federal income tax based on tax rates, deductions, tax credits and taxable ... Read Answer >>
Take a brief look at how the Internal Revenue Service taxes different kinds of dividends, including taxation on dividends ... Read Answer >>
Understanding common tax terms including gross income and taxable income can help individuals navigate tax accounting in ... Read Answer >>