$1 Million Employee Compensation Tax Limit Proposed

Biden's FY 2025 Green Book was published today. It's 20 pages longer than last year but 95% of the proposals from last year are back.

I doubt if anything will come from the proposals.

The only new proposal that was interesting is to limit compensation deduction to $1 million maximum (per employee) for C-corporations.

Currently publicly traded companies get a maximum deduction of $1 million for covered employees (CEO and a few other employees). This applies to stock compensation as well.

 The proposal limits compensation deductions to $1 million for all employees (not just covered employees) from all c-corporations (including privately held). .

Many corporations pay large salaries that sometimes the IRS says is "unreasonable" as the corporation tries to reduce its income to avoid paying dividends (which are taxable to the shareholders). So it's not uncommon to see privately held companies pay employees over $1 million.