US Corporate Tax Calculator 2025

Understanding US Corporate Tax System

The United States taxes corporations at a flat federal rate of 21% following the Tax Cuts and Jobs Act of 2017. The Tax Foundation and Internal Revenue Service administer corporate taxation for C corporations, S corporations, partnerships, and other business entities. Additionally, corporations must pay state corporate income taxes that vary from 0% (in nine states) to nearly 10% depending on business location and structure. Understanding deductions, credits, alternative minimum tax, and depreciation methods is essential for tax planning.

Federal Corporate Tax Rate 2025

Since January 1, 2018, the United States imposes a flat federal corporate income tax rate of 21% on all C corporations. This represents a significant reduction from the previous tiered system that reached 35%. The Tax Cuts and Jobs Act fundamentally transformed the US corporate tax system from a worldwide taxation approach to a territorial system, incentivizing domestic business expansion.

State Corporate Tax Rates by State 2025

State corporate income tax rates vary significantly across the 50 states. Nine states (Delaware, Nevada, South Dakota, Texas, Washington, Wyoming, Florida, and Ohio) impose no corporate income tax, creating tax planning opportunities for business location decisions. Rates in other states range from 2.5% in North Carolina to 9.8% in Minnesota and Iowa. Many states use federal taxable income as the starting point for state corporate tax calculation, while others define their own tax base.

How to Calculate US Corporate Income Tax

Standard Federal Corporate Tax Calculation

Corporate Alternative Minimum Tax (CAMT) Calculation

The Inflation Reduction Act (IRA), effective for tax years beginning after 2022, established a new corporate alternative minimum tax of 15% on adjusted financial statement income (AFSI) for "applicable corporations." An applicable corporation is one with a three-year average adjusted financial statement income exceeding $1 billion.

If CAMT applies, the corporation's total tax is the greater of regular corporate tax or CAMT. The corporation generates minimum tax credits equal to CAMT paid, which can offset regular tax in future years indefinitely.

Deductible Corporate Expenses

The Internal Revenue Code Section 162 allows deductions for ordinary and necessary business expenses. The following are standard deductible items for corporate tax purposes:

Depreciation Methods and Section 179 Expensing

Property used in business generally cannot be immediately expensed but must be depreciated over its useful life using the Modified Accelerated Cost Recovery System (MACRS). However, Section 179 of the Internal Revenue Code allows immediate expensing of qualifying property up to specific limits, providing significant tax benefits for capital investments.

MACRS Depreciation Periods

• 3-Year Property: Special tools, manufacturing devices
• 5-Year Property: Computers, automobiles, office equipment, light trucks
• 7-Year Property: Office furniture, fixtures, most machinery and equipment
• 10-Year Property: Vessels, single-purpose agricultural structures, trees and vines
• 15-Year Property: Land improvements (sidewalks, roads, fences), restaurant property
• 20-Year Property: Farm buildings
• 27.5-Year Property: Residential rental real property
• 39-Year Property: Nonresidential real property (placed in service after May 12, 1993)

Section 179 Expensing (2025)

The Section 179 deduction allows businesses to immediately expense the cost of qualifying property instead of depreciating it over time. For tax year 2025, the maximum Section 179 deduction is $1,220,000 for property placed in service during the year, with a phase-out threshold of $4,866,000.

Corporate Tax Credits

Tax credits directly reduce tax liability dollar-for-dollar and can significantly lower the effective corporate tax rate. Common credits for businesses include:

• Research and Development (R&D) Credit: Up to 20% of qualifying research expenses; Small businesses can offset payroll taxes
• Work Opportunity Tax Credit (WOTC): Up to $9,600 per employee for hiring from designated target groups
• Small Business Stock Credit: Up to 50% exclusion on gains from qualifying small business stock held 5+ years
• Energy Credits: Investment tax credit for renewable energy, energy-efficient property, electric vehicle charging
• Historic Property Credit: 20% of qualified rehabilitation expenses for certified historic structures
• Credit for Qualified Commercial Property: 10-year basis reduction for certain energy-efficient commercial buildings
• Disabled Access Credit: Up to $5,000 per year for accommodations for disabled individuals
• Empowerment Zone Employment Credit: Up to $3,000 per employee wages paid in designated zones

Net Operating Loss (NOL) Provisions

A Net Operating Loss occurs when business deductions exceed gross income. Under the Tax Cuts and Jobs Act (2017) and subsequent modifications, NOLs can be carried forward indefinitely to offset future taxable income, but with important limitations:

• Carryforward Availability: Indefinite carryforward for NOLs generated in 2018+; 20-year carryforward for pre-2018 NOLs
• 80% Limitation: For NOLs generated in 2021+, annual deduction limited to 80% of taxable income (100% allowed under emergency provisions through 2025)
• No Carryback: NOLs cannot generally be carried back to prior years (exception: 2018-2020 NOLs allowed 5-year carryback under CARES Act)
• Ownership Changes: Strict limitations apply if corporation undergoes substantial ownership changes (Section 382 limitations)

International Taxation Considerations

The Tax Cuts and Jobs Act and subsequent legislation (particularly the Inflation Reduction Act) significantly modified how US corporations are taxed on international income. Key provisions include:

• Territorial System: Foreign-source income generally not taxed if earned by foreign subsidiaries
• Foreign Tax Credit (FTC): Credits against US tax for foreign taxes paid on foreign-source income
• Base Erosion and Anti-Abuse Tax (BEAT): 10.5% minimum tax on modified taxable income for corporations with $500M+ gross receipts making base-eroding payments to related foreigners
• Global Intangible Low-Taxed Income (GILTI): US shareholders of foreign corporations include 50% of foreign subsidiaries' GILTI in income
• Foreign Derived Deduction Eligible Income (FDDEI): 37.5% deduction on FDDEI (sales to foreign persons of US-origin property)

Pass-Through Entity Taxation (S Corporations, Partnerships, LLCs)

Businesses organized as S corporations, partnerships, or LLCs (taxed as partnerships) generally do not pay federal corporate tax. Instead, taxable income "passes through" to owners who report it on personal tax returns. This can result in lower overall taxation if owners are in lower individual tax brackets than the 21% corporate rate, but also exposes income to self-employment taxes.