Which is Better: An S Corp or a C Corp for Deductions?


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s corp vs c corpGot a tax question? We’re happy to help. You can become a client, you can get a consultation or (the free solution) you can go to USTaxAid.com to ask your questions and I’ll answer it in a blog.

Here’s a question I recently received:

“Any difference in buying a business car into my LLC-S verses my LLC-C? Are deductions the same?”

There are a number of ways to write off business use of a car: the company could buy it and your personal use is taxable, you could own it and the business reimburses for business miles or you could get reimbursed for the business percentage of vehicle changes.

Today’s question, though, is more about the difference between S Corporations and C Corporations.  And the real question is probably, “Where do you get the better tax benefit?”

A C Corporation does not flow through the net, taxable income to the owners. An S Corporation does. So a better approach is to look at what your personal tax bracket is and compare that to your C Corporation tax bracket. For example, if you’re currently at the 39.6% personal tax bracket and the 15% corporate tax bracket, you want to take deductions through an S Corporation. That reduces your personal tax bracket and so you’ll pay less tax overall.   If on the other hand, you’re at the personal income tax bracket of 15% and the 35% corporate tax bracket, you want deductions at the corporate level.

In the end, the answer is “it depends.”



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