Which statement about the tax advantages of sole proprietorships is true?

Sole proprietorships typically enjoy certain tax advantages that can be more favorable than those for corporations. One key aspect is that income from a sole proprietorship is taxed directly on the owner's personal income tax return. This means that profits are subject to personal income tax rates, which can often be lower than corporate tax rates depending on the individual's overall income.

Furthermore, sole proprietors can take advantage of various deductions that directly offset their taxable income, including business expenses such as home office deductions, health insurance premiums, and retirement contributions. This direct taxation at the individual level can sometimes result in a lower overall tax burden compared to corporations, which face double taxation—once at the corporate level on profits and again at the individual level when dividends are distributed to shareholders.

In contrast, the options suggesting higher taxes for sole proprietorships or that they have no tax advantages misunderstand the fundamental tax structure applicable to these business entities. Ultimately, the tax benefits available to sole proprietors make the statement about their generally more favorable tax treatment accurate.