Investing in Dividend Stock as an S corporation vs a an Individual

[moriej32]

Would there be any tax advantages if I bought stocks through an S corporation rather than as an individual? I want to purchase dividend stocks such as those from the Dividend Aristocrats, QYLD, ect… I initially will reinvest the stock dividends for a couple of years before starting to live off the dividends. At this time I don’t plan to sell the dividend stock, but would like to know if there are any tax saving advantages from living off the dividends and selling the stock as an S corporation rather than as an individual. Thanks in advance for any help you can give.

[Anonymous_ · Accepted solution]

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@moriej32 wrote:

Would there be any tax advantages if I bought stocks through an S corporation rather than as an individual?

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There would be little to no advantage, in terms of income taxes, as the dividends would be pro rata share items and passed through to you (at 100% if you are the sole shareholder) on your K-1.

[Mike9241]

there actually can be a disadvantage depending on the state.  some impose an income tax on the S-Corp earnings.  in addition, that state income tax would likely need to be reported on schedule A of your 1040 rather than schedule E.

as others have said each year the S-Corp income would pass through to the shareholders and be taxed as if they earned the income directly.

they would face a problem of having to come up with $$$ to pay the income taxes on the S-Corp income

[mwalkermm]

Following up on this question! If the SCorp gets paid a dividend from stock it owns, couldn't that dividend be used to do either solo 401 contributions or profit sharing contributions? In those cases it wouldn't be taxed until the employee (owner) withdraws it in retirement, right?