Corporations
C corp tax rate: the 21% federal corporate rate explained
C corporations pay a flat 21% federal income tax on taxable income. See how the rate applies, what reduces taxable income, who files Form 1120, the due dates, estimated tax rules and 2026 penalties.
Prepared by Aldro Accounting · Updated · Sources checked
The quick answer
The federal corporate income tax rate is a flat 21% of taxable income. The IRS says that for tax years beginning after December 31, 2017, the graduated corporate rates no longer apply, and corporations, including qualified personal service corporations and members of a controlled group, are taxed at 21%. C corporations report it on Form 1120, generally due by the 15th day of the 4th month after the tax year ends.
One flat 21% federal rate
For tax years beginning after December 31, 2017, the graduated corporate tax structure no longer applies. Corporations are taxed at a flat rate of 21% of taxable income. That includes qualified personal service corporations and members of a controlled group, which don't get a different rate.
So the federal math is one step: the IRS Form 1120-W instructions say to multiply expected taxable income by 21%. A corporation with $50,000 of taxable income and one with $5 million pay the same federal percentage.
The 21% rate applies to taxable income, not revenue. Taxable income is what's left after the corporation's deductions on Form 1120, so the deduction rules below change the tax as much as the rate does.
Who pays the corporate rate and files Form 1120
Form 1120 reports a corporation's income, gains, losses, deductions and credits, and figures its income tax. Unless exempt under section 501, all domestic corporations, including those in bankruptcy, must file an income tax return whether or not they have taxable income.
An LLC can file Form 1120 only if it has filed Form 8832 to be treated as an association taxable as a corporation. Corporations engaged in farming, other than subchapter T cooperatives, also use Form 1120.
A foreign-owned domestic disregarded entity covered by section 6038A doesn't owe a U.S. income tax return, but it must file a pro forma Form 1120 with Form 5472 attached. Failing to file Form 5472 when due brings a $25,000 penalty.
Rules that shape taxable income
The Form 1120 instructions set limits on several deductions. These are the ones small and mid-size corporations most often meet.
- Business interest: generally limited to business interest income, plus 30% of adjusted taxable income, plus floor plan financing interest. The disallowed part carries forward (section 163(j))
- Charitable contributions: generally capped at 10% of taxable income, with the excess carried over to the next 5 tax years
- Net operating losses from tax years beginning after 2017: the deduction is limited to 80% of taxable income figured before the NOL deduction, over any pre-2018 NOL carryover
- Domestic research and experimental costs: new section 174A lets corporations deduct them in tax years beginning after December 31, 2024
- Officer pay: corporations with total receipts of $500,000 or more complete Form 1125-E, Compensation of Officers
When the tax is filed and paid
Generally, a corporation files Form 1120 by the 15th day of the 4th month after its tax year ends. A corporation with a fiscal year ending June 30 files by the 15th day of the 3rd month after year end. When a due date falls on a Saturday, Sunday or legal holiday, the return can be filed the next business day.
Form 7004, filed by the regular due date, requests an automatic extension of time to file. The tax itself is generally due in full by the original due date, not including extensions.
A corporation that expects its total tax for the year, less credits, to be $500 or more makes estimated tax installments by the 15th day of the 4th, 6th, 9th and 12th months of the tax year. Corporations must use electronic funds transfer for all federal tax deposits. EFTPS and the IRS business tax account are free.
Penalties on corporate tax
Both percentage penalties are figured on the unpaid tax. The late-filing penalty won't be imposed if the corporation shows the late filing was due to reasonable cause.
What a small C corp's return includes
A corporation doesn't have to provide balance sheets or the book-to-return reconciliations if its total receipts and its total assets at year end are both under $250,000. A corporation with total assets of $10 million or more files Schedule M-3 instead of Schedule M-1. Corporations that file 10 or more returns of any type in a calendar year must e-file Form 1120.
For tax years beginning in 2025, a corporation is a small business taxpayer if its average annual gross receipts for the 3 prior years are $31 million or less and it isn't a tax shelter.
Aldro's flat yearly price covers everything tax for the year, including Form 1120 and its state returns. Our team prepares and files them.
Worked example
Say a calendar-year C corporation has $120,000 of taxable income for 2026 after its deductions. Federal tax at 21% is $25,200. Because that's well over $500, it makes estimated payments by the 15th day of the 4th, 6th, 9th and 12th months (April, June, September and December), for example four payments of $6,300. If it instead filed three months late with $5,000 of tax still unpaid, the late-filing penalty would be 5% for each of the three months, or $750, before any late-payment penalty.
Common questions
What is the federal corporate tax rate for 2026?
A flat 21% of taxable income. The graduated corporate rates stopped applying for tax years beginning after December 31, 2017.
Do personal service corporations pay a different rate?
No. The IRS says qualified personal service corporations and members of a controlled group are also taxed at the flat 21% rate.
Does a corporation with no taxable income still file?
Yes. Unless exempt under section 501, every domestic corporation files an income tax return whether or not it has taxable income.
When is Form 1120 due?
Generally by the 15th day of the 4th month after the tax year ends, or the 3rd month for a fiscal year ending June 30. Form 7004 extends the time to file, not to pay.
When does a C corp have to pay estimated tax?
When it expects total tax, less credits, of $500 or more. Installments are due by the 15th day of the 4th, 6th, 9th and 12th months of the tax year.
The cheapest way to get your business taxes done: $399 flat.
Business tax filing is $399 USD a year, and it covers everything tax for that year.
How it works
- Tell us about your business. A two-minute form. No payment is collected through it.
- Get your next steps by email. We’ll email you the next steps within one business day. After you sign up we’ll send you a secure upload link for your documents.
- We file it. Our team prepares and files your return. Add bookkeeping for $20 a month if you want it.
What's included
$399 a year covers everything tax for that tax year.
- Every business return for the year. All the federal and state or provincial business returns you need for the tax year: Schedule C, 1065, 1120-S, 1120 and their state returns in the US; T2, or T1 with T2125, in Canada.
- More than one state. Multi-state returns are included at the same price.
- Your personal return. The owner’s personal return (1040 or T1) is included when it’s needed for the business income.
- Quebec. Quebec returns (CO-17, TP-1 and TP-80) are included. Our Quebec pages are in French, and our team works with you in English.
- Extensions and reminders. Extensions (Form 7004 or 4868) and quarterly estimate reminders are included.
- Information returns. 1099-NEC, T4/T4A and T5018 slips are included in the tax price.
- City and excise returns. City and local business tax returns, and state excise returns such as Washington B&O, are included in the yearly price.
- Franchise tax reports. State franchise tax reports, such as the Texas franchise tax report, are included.
- Estimated tax and instalment amounts. We work out your quarterly estimated tax payments in the US, or your CRA instalments in Canada, and tell you what to pay and when.
- Unfiled past years. Each unfiled prior-year return is $399 per tax year, the same flat price.
- Bookkeeping at $20 a month. Unlimited bank and card accounts, monthly reconciliation and monthly statements.
Basic inventory tracking for online stores, such as Shopify, is included. Full cost-of-goods reconciliation is quoted separately. Payroll processing and sales-tax filing aren’t included in bookkeeping. Prices are in USD. Our team prepares and files your return.
Sources
- IRS: 2018 Instructions for Form 1120-W · checked October 31, 2026
- IRS: Instructions for Form 1120 · checked October 31, 2026
- IRS: Instructions for Form 1120 (web) · checked October 31, 2026
- IRS: Instructions for Form 5472 · checked October 31, 2026
- IRS: Rev. Proc. 2025-32 · checked October 31, 2026
This guide explains general rules from the sources listed. It isn’t tax advice for your situation.