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Old 02-01-2016, 10:27 PM
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C-Corp dividends ordinary or qualified?

Privately owned C-corp has two equal s/h that are also the sole officers as well as employees. Ending tax year with $40k net profit on which federal and state corporate tax will be paid. Shareholders want to take dividends. My memory tells me that these are qualified dividends and would be taxed at the same rate as net capital gains (0%, 15% or 20%). However, a few articles I've read list them as ordinary dividends taxed as regular income. Can you clarify?



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Old 02-02-2016, 08:19 AM
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Privately owned C-corp has two equal s/h that are also the sole officers as well as employees. Ending tax year with $40k net profit on which federal and state corporate tax will be paid. Shareholders want to take dividends. My memory tells me that these are qualified dividends and would be taxed at the same rate as net capital gains (0%, 15% or 20%). =========>
If your C corp uses its profits to pay dividends to you, a shareholder, the dividends very possibly get taxed at a 15% rate on your 1040 if your marginal tax rate is lower than 39.6% but higher than 15%.. I mean as you receive $100K of these so-called "qualified dividends," the tax very possibly equals $15K or 15% on your 1040. most regular dividends from U.S. companies with normal company structures (corporations) are qualified dividends.


However, a few articles I've read list them as ordinary dividends taxed as regular income. Can you clarify?=====>>>>>>>correct; Non-qualified dividends do not qualify for the lower tax preference and are thus taxed at an individual?s normal income tax rate. Regardless of your tax bracket, this difference means you will pay significantly higher taxes on a non-qualified payout.



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