How corporate tax works in United States
The federal corporate income tax rate is 21% for C corporations. That is the headline rate, but it is not the whole story because state corporate income tax or franchise tax can still apply.
Many U.S. businesses are not taxed as C corporations. Partnerships, most LLCs and S corporations are generally pass-throughs, so the tax is paid at owner level rather than at the entity level.
Large corporations should also check the corporate alternative minimum tax. The IRS says CAMT is a 15% minimum tax on adjusted financial statement income and generally applies to large corporations with average annual financial statement income above $1 billion.
Deductions, depreciation, nexus, apportionment and state filing positions can change the effective rate materially.
Tax rates at a glance
- C corporation tax
- 21%Federal
- CAMT
- 15%
- Pass-through entities
- Different
- State tax
- Varies
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
FoundersC corporationsHolding companiesMNE groupsInvestors
Watch out for
- Do not assume every U.S. entity pays the 21% corporate rate. Entity classification is the first thing to check.
- CAMT is a separate minimum-tax layer for large corporations, so a group can have more than one federal corporate tax exposure.
- State corporate and franchise taxes can materially change the effective rate and the compliance burden.
- International structures need transfer pricing, withholding tax and treaty checks, not just a headline rate.
Frequently asked questions
What is the corporate tax rate in the U.S.?
The federal C-corporation rate is 21%.
Do LLCs pay U.S. corporate tax?
Usually not at the entity level. Most LLCs are taxed as pass-throughs unless they elect corporate treatment.
Does the U.S. have a corporate minimum tax?
Yes. Large corporations can fall into the 15% corporate alternative minimum tax regime based on adjusted financial statement income.