S corp distribution income tax rate


1

I am the sole owner of an S corp and I am the only employee. If I make $100,000/year and I pay myself $50,000 as a salary and the other $50,000 as distribution. How much income tax do I have to pay on the distribution portion?

Can any one point me to a source that tells me what the tax rate is for s corp distribution for 2012?

Tax Distribution Small Business S Corp

asked Dec 4 '12 at 16:07
Blank
Java Student
106 points

1 Answer


4

There's no tax on S-Corp distributions. There's tax on your income. It is called "ordinary income" and is taxed at your marginal tax rate. There's no difference between the first 50K you got as salary and the second 50K you got as distribution in that respect - they're both taxed at your ordinary income rates. The salary portion is also subject to the payroll (FICA) taxes.

answered Dec 4 '12 at 16:55
Blank
Littleadv
5,090 points
  • I was able to calculate all the taxes on the salary part but I am still confused as to how to calculate taxes on the distribution part. – Java Student 5 years ago
  • Don't think of it as paying taxes on two different parts. Think of it as paying two different taxes: (1) on your income of $100,000. (2) payroll/self-employment taxes on the $50,000. [Note that you get to deduct a portion of the payroll taxes from your income.] Also, note that claiming part of the profits as a 'distribution' is looked on with suspicion by the IRS. – Chris Fulmer 5 years ago
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Tax Distribution Small Business S Corp