Your Ask Joey ™ Answer

What percentages are used to determine the dividends received deduction?

The threshold for the dividend received deduction is based on the percentage ownership of the company that the corporation owns. As you can see below, if the C corporation owns 0% to 20% of another company, then they will receive a 50% deduction. Ownership of 20% to 80% results in a 65% deduction. If the ownership is 80% or more, then the C corporation can take a deduction of 100% on the dividend received from the subsidiary.

The example below illustrates how an ownership of 40% translates into a percentage deduction of 65%:

Back To All Questions

You might also be interested in...

  • Three Reasons to Become an Accountant

    If you’re someone who is intrigued by numbers, enjoys problem-solving and wants to help others, then accounting might be the perfect career for you. While some people may be put off by its unalluring reputation, accounting is an excellent career choice that has many benefits. In this article, we look at three of the reasons...

  • Qualified Retirement Planning: Tax Advantages & Disadvantages

    Home Advantages and Disadvantages of Tax-Free and Deferred-Tax Retirement Plans What are “qualified retirement plans” and how can they be effective for tax planning? Well, there are plenty of tax savings advantages to individuals contributing to tax-free retirement accounts, as well as tax-deferred retirement accounts. However, this doesn’t necessarily mean that there are no disadvantages...

  • CPA Evolution Survival Guide

    Download Your eBook by selecting the download icon in the top right-hand corner