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SESK: Stuff Everyone Should Know · sesk.info/biz-c-corp-double-tax

Why do C corporation profits face a "double tax"?

Taxed to the corporation, then again to shareholders as dividends.

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  1. The company files the same return twice
  2. Owners pay tax twice a year
  3. Taxed at the company, then again as dividends ✔

Why: A C corporation pays tax on its profit when earned. When it pays dividends, shareholders pay tax on them again, and the corporation gets no deduction for the dividends.

Huh, didn't know that: Shareholders also can't deduct the corporation's losses on their own returns.

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References

Answer: Taxed at the company, then again as dividends. A C corporation pays tax on its profit when earned. When it pays dividends, shareholders pay tax on them again, and the corporation gets no deduction for the dividends.

  1. IRS: Forming a corporation www.irs.gov/businesses/small-businesses-self-employed/forming-a-corporation
    The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends.
    Checked 2026-10-11.

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