Characteristics and Income Taxation of Business Entities - Special Taxes

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

 

Distributions

You May Also Like

Related Articles
  1. Entrepreneurship

    Fed Raising Rates Affects Startup Funding

  2. Professionals

    Risks to Consider When Investing in ...

  3. Personal Finance

    Why Cash Could Be Your Best Bet

  4. Options & Futures

    Options Strategies That Profit From ...

  5. Personal Finance

    Top Spots to Wine and Dine Clients in ...

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!