Passive Income Limitations For S Corps

Some people opt to establish an s corporation in the united states for their contract which means the w 2 and schedule k 1 income are excluded from income tax up to a certain amount.
Passive income limitations for s corps. People working abroad can exclude a percentage of their earned income while working overseas. If the business does generate more than 25 percent of its receipts from passive income the excess is taxed at the highest corporate income rate. If more than that comes from passive income the. Capital gains and or losses.
One example of passive versus non passive income is the money an author earns from the sale of his book. An s corporation is not permitted to generate more than 25 percent of its gross receipts from passive income in any given year if it has accumulated earnings and profits.