Jill Meier is the sole owner of Meier Corp., which provides her only source of income. Jill has always paid herself entirely by drawing dividends from her corporation.
A friend suggested that as long as she is earning about what she would have to pay someone else to run the business, she might be better off paying herself a salary instead of dividends, because she would avoid the problem of double taxation.
If Jill's company earns $230,000 all of which she will pay to herself, how much will she take home under each method?
Assume a corporate tax rate of 32% and a personal tax rate of 21% on both salary and dividend income.