What is Federal Corporate Income Tax?
Federal Corporate Income Tax is the US federal tax on C-corporation taxable income. It is a flat 21% rate (post-TCJA, since 2018). S-corporations, LLCs and partnerships are pass-through entities and do not pay federal corporate income tax — profits flow to owners' personal returns.
Current Rate (Calendar year by default; C-corps may elect a fiscal year)
21% flat (C-corporations only)
Example
A C-corp with $400,000 taxable income pays $84,000 federal corporate income tax (21%). State income tax is separate and varies by state (e.g., 8.84% California, 0% Texas/Wyoming/South Dakota).
How Federal Corporate Income Tax works in United States
The Tax Cuts and Jobs Act of 2017 lowered the federal corporate income tax to a flat 21% from the prior graduated rates topping out at 35%. The 21% applies to all C-corp taxable income with no graduated brackets.
C-corp profits face potential double taxation: 21% at the corporate level, then qualified dividend tax (0%/15%/20%) when distributed to shareholders. Pass-through entities (S-corp, LLC, partnership) avoid the corporate layer — but owner-employees of S-corps must pay 'reasonable compensation' as W-2 wages subject to FICA.
Related terms
A C-corporation is a US business entity taxed separately from its owners under Subchapter C of the Internal Revenue Code. It pays 21% federal corporate income tax on profits, and shareholders pay personal tax on dividends — the 'double taxation' of C-corp profits. Most VC-backed startups are Delaware C-corps.
An S-corporation is a US entity that elects pass-through taxation under Subchapter S. The corporation itself pays no federal income tax; profits flow to shareholders' personal returns. Limited to 100 shareholders, all US individuals (or certain trusts), and one class of stock. Owner-employees must pay 'reasonable compensation' as W-2 wages subject to FICA.
An LLC is a US business entity that combines limited liability with flexible tax treatment. Single-member LLCs default to disregarded entity status (taxed as sole proprietor on Schedule C). Multi-member LLCs default to partnership taxation (Form 1065). LLCs can elect S-corp or C-corp tax treatment via Form 8832/2553.
Self-employment tax is the US federal tax that covers Social Security and Medicare contributions for self-employed people, sole proprietors, and partners. The combined rate is 15.3% (12.4% Social Security + 2.9% Medicare) on net self-employment earnings.
Form 1120 is the annual federal income tax return for US C-corporations, due 15 April for calendar-year filers (15th day of the 4th month after fiscal year-end for fiscal-year filers). Six-month automatic extension available via Form 7004.
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