# What is Federal Corporate Income Tax?

Country: United States

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.

Source: https://www.irs.gov/forms-pubs/about-form-1120

## Related terms

- [C-Corporation](https://accounts-os.com/us/glossary/c-corp)
- [S-Corporation](https://accounts-os.com/us/glossary/s-corp-us)
- [LLC (Limited Liability Company)](https://accounts-os.com/us/glossary/llc-us)
- [Self-Employment Tax](https://accounts-os.com/us/glossary/self-employment-tax)
- [Form 1120 (C-Corp Annual Return)](https://accounts-os.com/us/glossary/form-1120)