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Corporate Income Tax Explained


For new business owners or anyone entering the corporate world for the first time, corporate income tax can seem like a minefield. Let’s look at it in a little more detail: – PowerPoint PPT presentation

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Title: Corporate Income Tax Explained

Corporate Income Tax Explained
  • For new business owners or anyone entering the
    corporate world for the first time, corporate
    income tax can seem like a minefield. Lets look
    at it in a little more detail
  • What is Corporate Income Tax?
  • Corporate income tax is an entity-level tax
    applying only to C corporations. Corporate
    profits can also be subject to another, second
    degree of taxation at individual shareholder
    level, on dividends when distributed and on
    capital gains from the sale of shares. The
    highest tax rate on dividends and capital gains
    is at 23.8 now, which includes the 3.8 tax on
    net investment income.

  • There are many businesses based in the U.S. who
    are not subjected to this income tax, and instead
    are taxed as what are called flow-through
    entities. These businesses dont face entity
    level taxes, but the owners of these businesses
    are required by law to include their allocated
    share of the profits in their taxable income
    under the individual income tax.
  • Flow-through entities can be sole
    proprietorships, partnerships and corporations
    that are eligible and choose to be taxed under
    subchapter S of the Internal Revenue Code (S

  • Taxable corporate profits explained
  • The profits of US resident corporations are
    subject to taxes at rates that are graduated,
    from 15 up to 35, and most corporate income
    falls into the maximum rate.
  • Taxable corporate profits are those that are
    equal to the receipts less allowable deductions
    of a corporation, and can include anything from
    sold goods, to wages, employee compensation,
    depreciation and advertising.

  • Residents of the U.S. who are multinationals are
    required to pay tax on their profits made
    worldwide, but the taxable profit from their
    controlled foreign subsidiaries is deferred until
    those profits are paid back as dividends to the
    parent corporation in the U.S. Double taxation
    can be avoided by U.S. multinationals being able
    to claim a credit for taxes paid to foreign
    governments on income that was earned overseas,
    but only up to their U.S. tax liability on that
  • Corporations that are based in the United States
    but are owned by foreign multinational companies
    are subject to the same U.S. corporate tax rules
    on their profits from business undertaken in the
    U.S. as U.S. owned corporations.

  • Corporate income tax in the U.S. is the third
    largest source of federal revenue after income
    taxes applying to individuals and payroll taxes,
    and in recent years has brought in revenues equal
    to around 2 of GDP with minor fluctuations.
  • At Heyer Associates, we proactively assist our
    individual and small business clients in meeting
    their goals. Our key area of focus is ensuring
    that our clients remain compliant with federal
    and state tax laws by providing them with high
    quality accounting and tax services Miami Beach.
    If you are looking for individual tax preparation
    in Miami Gardens, Heyer Associates would be a
    right option.