S corporations are pass-through entities, in which income from the firm is generally not subject to corporate tax but instead passes through to shareholders for federal income tax purposes and is taxed at the owners’ individual tax rates. S firm losses can pass through to shareholders, too, subject to various limitations. In general, distributions are nontaxable to the extent of the shareholder’s stock basis. Take into account the new 20% deduction for pass-through income. For an S firm owner in the 37% tax bracket, getting a 20% pass-through write-off has the same effect as lowering his or her tax rate on S corporation profits to 29.6%. However, this break is riddled with lots of restrictions and limitations. For example, it’s not available for high earners in many service fields. Also, note that it is temporary. As with most individual tax changes in the new law, the 20% deduction ends after 2025.