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Financial Questions and Answers

Q: What is the difference between a C corporation and an S corporation from a federal income tax perspective?

A: One of the most significant differences is that a C corporation’s income is potentially taxed twice — once to the corporation (at the applicable corporate tax rates) and again to the owners of the company (the shareholders) if the income is distributed to them as dividends. An S corporation, however, generally is not taxed on its income at the federal level. Instead, all corporate income, deductions, losses, and credits pass through the corporation to the shareholders and are reported by the shareholders. There are also other differences that you will want to know about if you are thinking of incorporating a business.

Q: I am planning to retire within the next five years. What can I expect my biggest expenses will be in retirement?

A: Based on government statistics, housing, food, transportation, and health care could be among your largest expenses. The good news is that household expenditures generally decline with age. Data from the U.S. Bureau of Labor Statistics show that annual housing expenditures peaked at $20,619 for the 35–44 age group in 2013 and declined for those in older age groups — $15,639 for people ages 65–74 and $12,314 for those ages 75 or older. Health care was the only expenditure that increased with age. People between the ages of 65 and 74 spent $5,188 annually for out-of-pocket health care expenses.

December 2016 Newsletter Previous Article