According to the IRS: Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. It is treated in the same way as a partnership, in that generally taxes are not paid at the corporate level.

How much do S corps pay in taxes?

Instead, California requires S corporations to pay a 1.5% franchise tax on income, with a minimum tax of $800. In addition, an individual S corporation shareholder will owe tax to the state on his or her share of the company's income. Example: For the latest tax year, your S corporation had net income of $100,000.

Why doesn't an S Corp pay taxes?

How the S Corp Pays Taxes. As previously mentioned, the S Corp passes its profits, losses, credits, and deductions to its shareholders who report it on their personal tax returns. Therefore, the S Corp doesn't pay federal income taxes.