Tax Deduction Tip for your Corporation
There are many benefits of opening a corporation including this tax deduction tip.
If you did not already know, corporations that qualify for small business deductions can pay as low as 9% in taxes. The low tax rate applies to the first $500,000 in taxable income, anything above that your corporation will have to pay as much as 30%.
A common misconception is that you can avoid paying the 30% by opening another corporation when you hit the $500,000 threshold, but that is not the case. When corporations are associated they have to share the small business deduction.
This provision was put in place to prevent business owners from incorporating multiple companies to go around the $500,000 threshold and should be considered before taking on another corporation.