Megan operates a housecleaning business as a sole proprietor…
Megan operates a housecleaning business as a sole proprietorship. She oversees a team of 10 cleaning personnel, markets the business, and provides supplies and equipment. The business has been generating net taxable profits of $60,000 per year, before considering the QBI deduction. As a sole proprietor, Megan qualifies for the 20 percent deduction, reducing taxable income from the business to $48,000. Assume that Megan’s marginal tax rate on ordinary income is 35 percent and that she has no pressing need for cash flow from this business. What is the income tax savings if Megan operates the business as a C Corporation rather than as a sole proprietorship?