Dividend exclusion definition
/What is the Dividend Exclusion?
The dividend exclusion is an IRS rule that allows a proportion of all dividends received to be excluded from the calculation of corporate income taxes. This exclusion is not available to individual taxpayers. The exclusion tranches are as follows:
When a corporation owns less than 20% of the other business, it can deduct 70% of the dividends received from it
When a corporation owns 20% to 79% of the other business, it can deduct 75% of the dividends received from it
When a corporation owns 80% or more of the other business, it can deduct all of the dividends received from it
The intent of the dividend exclusion rule is to avoid double taxation for the receiving entity.