SESKStuff Everyone Should Know
SESK: Stuff Everyone Should Know · sesk.info/biz-s-corp-pass-through

How are S corporation profits taxed for federal income tax?

They pass through to shareholders' personal returns.

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  1. Taxed twice, like a C corp
  2. Never taxed at all
  3. Passed through to shareholders' personal returns ✔

Why: S corporations pass income, losses, deductions and credits through to shareholders, who pay tax at their individual rates. That avoids the double taxation of a C corporation.

Huh, didn't know that: An S corporation can still owe entity-level tax on certain built-in gains and passive income.

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References

Answer: Passed through to shareholders' personal returns. S corporations pass income, losses, deductions and credits through to shareholders, who pay tax at their individual rates. That avoids the double taxation of a C corporation.

  1. IRS: S corporations www.irs.gov/businesses/small-businesses-self-employed/s-corporations
    This allows S corporations to avoid double taxation on the corporate income.
    Checked 2026-10-11.

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