What is active trade or business income and how is it taxed?
A. You may elect to have qualifying active trade or business income from a pass-through entity taxed at a flat rate instead of the graduated tax rate for individual income. The rate is 6% for Tax Year 2007, 5.5% for Tax Year 2008, and 5% for tax years beginning after 2008. Active trade or business income is all pass-through income from sole proprietorships, partnerships, S corporations, or Limited Liability Companies not taxed as C corporations, but does not include passive investment income or expenses related to it, capital gains or losses, guaranteed payments for personal services, or amounts reasonably related to personal services. Use Form I-335 to claim this election. Instead of determining the actual amount of income reasonably related to personal services, you may elect to claim a “safe harbor” if your total South Carolina taxable income from pass-through entities for which you perform personal services is $100,000 or less, excluding capital gains and losses. Using the “safe ha
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