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Nick Braun EA PhD - ArticlesFor more in-depth information you may be interested in our guide Tax Loopholes for Home Sellers. Inside we explain the latest and best tax saving techniques and strategies that you can use today, plus dozens of clear examples on
Home Capital Gains , Home Sale Tax and Capital Gains Tax Home Taxation of S CorporationsOne of the main reasons people set up an S corporation or make the S corp tax election for their LLC is to save self-employment taxes. Owners of S corporations are taxed much more generously. Salaries and bonuses are still subject to income tax and self-employment tax. Tax Treatment of Limited Liability CompanyLLCs enjoy very favourable tax treatment. They don’t have their own set of tax rules and there’s no such thing as an LLC tax return. What makes them special is that members can choose how the business is taxed. How to Deal With C Corporation TaxThe difference between C corporations and all the other entities is that C corps pay their own tax – they are not pass-through entities. The corporation pays corporate income tax on its profits at the following rates: Starting a LlcLLC stands for Limited Liability Company and the owners are called members. The LLC is a relatively new type of business structure. It was only in 1996 that most states had recognized them. Setting Up an S CorporationWe will take a close look at the drawbacks and S corporation advantages, also known as S corps. S corps offer limited liability and simple tax treatment. They’re pass-through entities which means the profits of the business pass through to the owners personal tax returns. What is a C CorporationA C Corporation is the only business structure that is never a pass-through entity. The difference between C corporations and others is that c corporations are completely separate C Corp tax entities. S Corporation Tax ExplainedMany businesses start life as an s-corp and when profitable become c corps to benefit from income splitting and fringe benefits. Alternatively they form an LLC which is simpler to form and operate but offers the same personal liability protection. Setting Up a Limited Liability CompanyBoth sole proprietors and partnerships can convert to a limited liability company. Until recently some states did not allow one-member LLCs. That is no longer the case. One-member LLCs are allowed in every state. Tax Rules for Home SellersIn 1997 new tax rules for home sellers were introduced contained in section 121 of the tax code. The following changes were made to the tax code. Home Sellers Partial ExclusionOne of the major dilemmas that both married and unmarried home owners face is what happens to the $250/500k capital gains tax exclusion if you sell your home after owning it or living in it for less than two years? And what happens if you’ve sold another home in the last two years?
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