ECONOMICS

Detailed explanation-1: -The double taxation of dividends is a reference to how corporate earnings and dividends are taxed by the U.S. government. Corporations pay taxes on their earnings and then pay shareholders dividends out of the after-tax earnings.

Detailed explanation-2: -Which Business Entities Experience Double Taxation? C-Corporations, or C-Corps (also known as just “corporations”), are the only business entity that experiences double taxation. Other business entities have different ways of paying taxes that don’t involve a second form of payment.

Detailed explanation-3: -Some securities are tax-exempt, while other types of dividends held within certain retirement accounts is non-taxable. However, qualified dividends are taxed at a rate based on a taxpayer’s marginal income rates.

Detailed explanation-4: -Examples of Double Taxation The United States’ tax code places a double-tax on corporate income with one tax at the corporate level through the corporate income tax and a second tax at the individual level through the individual income tax on dividends and capital gains.