The Tax Act of 2017, lowered corporate tax rates to 21%. The maximum personal tax rate is 35%. Depending on the state you live in, an author may be better off forming a C Corporation and taking reasonable salaries and later dividends and let profits grow inside of the C Corporation. Why? First the negative, money taken out of a C corporation as a dividend is taxed twice. So, if you pay a small salary and take out a dividend you pay double tax once at the corporate level and once when you take out the dividend. You also get to have retirement plans, health plans, health savings accounts. And if that isn’t enough, C Corporation profits invested in US Corporations receive a 50% exclusion for US Dividends. So, let’s do a what if:
What if you made $1 Million in book royalties in one year?
Corporation income $1,000,000.
Salary $275,000 to owner
Expenses for health insurance:
$25,000
Expenses for Retirement $30,750.
Expenses for Corporate Car: $30,000.
Rent from family member: $36,000
Taxable corporate income = $603,250.
Tax Federal: $126,682.
Individual: $66,000
FICA/Medicare = $21,070 combined.
Total tax hit: $213,572.

Individual comparison:
$1 Million income
Expenses for health insurance:
$25,000
Expenses for Retirement $30,750.
199A deduction $18,000
Taxable individual income: $926,250.
Tax: $267,075
Self-Employment Tax: $30,512.
Total Federal Tax: $297,587.

Savings: $84,015.

Year 2. Assume no new income:
$587,000 invested at 4% = $23,480
Taxable amount $11,740.
$275,000 salary;
Federal Taxable income: -$273,795
Loss carryback: 273,795
Refund: = $57,497.
Individual tax:
$66,000
FICA/Medicare $21,070 combined.
Net hit: $29,593.

As you can see for an author who has a large income in a given year, this process can be a great benefit.