US Corporate Tax 2026: 21% Federal Rate, OBBBA Changes & Business Guide
What taxes does your business pay in the USA in 2026? Flat 21% federal corporate rate, 100% bonus depreciation, R&D expensing, state taxes, payroll obligations, and filing rules for C Corps, S Corps, LLCs, and sole proprietors.
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Tax Residency and Federal Rates
US tax residents (corporations organized in the US or with effective management in the US) pay tax on worldwide income. Foreign corporations pay tax only on US-source income or income effectively connected with a US trade or business. The flat 21% federal CIT rate applies to all C corporations regardless of size or income level. Pass-through businesses (S Corps, partnerships, LLCs) are not taxed at the entity level - income flows through to owners and is taxed at individual rates.
C Corporations: flat 21% federal tax on all taxable income
Pass-through entities: taxed at owner's individual rate (10–37%)
US residents: taxed on worldwide income
Non-residents: taxed on US-source income at 21% (or 30% WHT on FDAP)
Corporate Alternative Minimum Tax (CAMT): 15% on adjusted financial statement income for large corporations
C Corporation
Federal Tax Rate
21%
Flat rate on taxable income
Bonus Depreciation
100%
Permanent under OBBBA
Dividend WHT
Up to 30%
On distributions to non-residents
Flat 21% rate regardless of income level
Separate legal entity with limited liability
100% bonus depreciation on qualified assets (permanent)
Immediate R&D expensing for domestic research
Subject to state corporate taxes (0–11.5%)
S Corporation
Entity Tax
Pass-through
No federal entity-level tax
Owner Tax Rate
10–37%
Individual income tax rates
QBI Deduction
Up to 20%
On qualified business income
No federal entity-level tax - income taxed at owner level
20% QBI deduction (permanent under OBBBA)
Limited to 100 shareholders (US residents only)
Owners can reduce self-employment tax vs LLC
Filing deadline: March 16, 2026 (Form 1120-S)
LLC (Limited Liability Company)
Default Tax
Pass-through
Or elect C Corp / S Corp
Self-Employment Tax
15.3%
On active members' income
Flexibility
High
Choose your tax treatment
Default: taxed as sole proprietor (single member) or partnership (multi-member)
Can elect S Corp or C Corp tax treatment
Members pay self-employment tax (15.3%) on active income
Limited liability protection for all members
Most flexible US business structure
Sole Proprietorship
Tax Rate
10–37%
Individual income tax rates
Self-Employment Tax
15.3%
Social Security + Medicare
Liability
Unlimited
Personal assets at risk
Taxed as personal income on Schedule C
Subject to self-employment tax (15.3%)
No separate legal entity
Unlimited personal liability
Filing deadline: April 15, 2026 (Form 1040)
Federal Corporate Tax Rate Overview 2026
| Business Type | Tax Rate | Key Features |
|---|---|---|
| C Corporation | 21% flat federal CIT | Separate entity, limited liability, 100% bonus depreciation, R&D expensing |
| S Corporation | Pass-through (10–37%) | No entity tax, 20% QBI deduction, max 100 shareholders |
| LLC (default) | Pass-through (10–37%) | Flexible structure, can elect C Corp or S Corp status |
| Sole Proprietorship | 10–37% + 15.3% SE tax | Simplest form, unlimited liability, Schedule C filing |
| Partnership (LP/LLP) | Pass-through (10–37%) | Partners taxed individually, K-1 reporting |
The 21% federal C Corp rate has been permanent since TCJA 2017. OBBBA (July 2025) made permanent 100% bonus depreciation and the 20% QBI deduction for pass-throughs.
100% Bonus Depreciation - Now Permanent
Full first-year expensing under OBBBA
Corporate Tax Deductions and Incentives
100% Bonus Depreciation
Permanent full first-year expensing for qualified property with a class life of 20 years or less, acquired after January 19, 2025. Includes machinery, equipment, furniture, and certain software. Businesses may elect 40% or 60% instead of 100%. New category: qualified production property (manufacturing buildings) - temporary through 2030.
R&D Expensing (Section 174A)
Domestic research and experimental costs are now fully deductible in the year paid or incurred, thanks to OBBBA. Foreign R&D costs must still be amortized over 15 years. Small businesses (under $31M gross receipts) can retroactively apply expensing to 2022–2024. The R&D tax credit under Section 41 remains available on top of the deduction.
Qualified Business Income (QBI) Deduction
Pass-through business owners can deduct up to 20% of qualified business income. OBBBA made this deduction permanent and raised the income phase-in range. Starting 2026, a minimum $400 deduction is guaranteed for anyone with at least $1,000 of QBI. Specified service businesses face phase-out limits at higher income levels.
Net Operating Loss (NOL) Carryforward
Business losses can be carried forward indefinitely. NOLs may offset up to 80% of taxable income in future years. No carryback is allowed (with limited exceptions). Tracking NOLs is critical for multi-year tax planning.
Withholding Tax on Dividends and Payments
US Withholding Tax Rates
The US imposes a 30% withholding tax on US-source dividends, interest, royalties, and other FDAP income paid to non-resident foreign persons. Tax treaties with over 60 countries reduce this rate - commonly to 15% for dividends and 0–10% for interest. US shareholders pay tax on qualified dividends at preferential rates of 0%, 15%, or 20% depending on income. There is no withholding tax on dividends paid between two US corporations that meet the dividends-received deduction requirements.
Non-resident WHT: 30% on dividends (reduced by treaty, typically to 15%)
Non-resident WHT: 30% on royalties (reduced by treaty)
Portfolio interest: generally exempt from WHT for non-residents
US individuals: qualified dividends taxed at 0%, 15%, or 20%
US corporate shareholders: dividends-received deduction available
Branch profits tax: 30% on effectively connected earnings remitted abroad
State Corporate Income Tax
State Tax Rates for 2026
44 states plus the District of Columbia impose a corporate income tax. Rates range from 2% in North Carolina (phasing to 0% by 2030) to 11.5% in New Jersey. Six states have no corporate income tax: Nevada, Ohio, South Dakota, Texas, Washington, and Wyoming - though Nevada, Ohio, Texas, and Washington impose gross receipts taxes instead. Several states reduced rates for 2026: Nebraska dropped to 4.55%, Pennsylvania to 7.49%. The average top state rate is about 6.57%. Businesses must also track state sales tax obligations - rates range from 0% to 7.25% (California) plus local additions.
Highest: New Jersey 11.5%, Minnesota 9.8%, Illinois 9.5%
Lowest (with CIT): North Carolina 2%, Missouri 4%, Arkansas 4.3%
No corporate income tax: NV, OH, SD, TX, WA, WY
Average state sales tax: 5.1%, combined average with local: 6.44%
Five states have no sales tax: OR, NH, MT, DE, AK (no statewide)
Employer Payroll Taxes and FICA
Payroll Tax Obligations for 2026
Employers must pay FICA taxes (Federal Insurance Contributions Act) of 7.65% on employee wages: 6.2% for Social Security (on wages up to $184,500) and 1.45% for Medicare (no cap). Employees pay the same 7.65%. Self-employed individuals pay the full 15.3% as self-employment tax. An additional 0.9% Medicare surtax applies to employee wages above $200,000. Federal Unemployment Tax (FUTA) is 6.0% on the first $7,000 of wages per employee, usually reduced to 0.6% with state credits.
Employer FICA: 6.2% Social Security + 1.45% Medicare = 7.65%
Employee FICA: same 7.65% withheld from wages
Social Security wage base 2026: $184,500 (up from $176,100)
Additional Medicare tax: 0.9% on wages over $200,000 (employee only)
Self-employment tax: 15.3% (deduct half as adjustment to income)
FUTA: 0.6% effective rate on first $7,000 per employee
Corporate Tax Filing and Deadlines
2026 Filing Calendar
C corporations on a calendar year file Form 1120 by April 15, 2026. S corporations and partnerships file by March 16, 2026 (Forms 1120-S and 1065). Sole proprietors file Schedule C with Form 1040 by April 15, 2026. Extensions add 6 months. C corps make quarterly estimated tax payments on April 15, June 15, September 15, and December 15. Pass-through owners make individual estimated payments on April 15, June 15, September 15, 2026, and January 15, 2027. Penalties apply for late filing (5% per month, up to 25%) and underpayment of estimated taxes.
C Corp (Form 1120): due April 15, extension to October 15
S Corp (Form 1120-S): due March 16, extension to September 15
Partnership (Form 1065): due March 16, extension to September 15
Sole Proprietor (Schedule C): due April 15, extension to October 15
C Corp estimated payments: April 15, June 15, Sept 15, Dec 15
W-2 and 1099-NEC forms: due to recipients by February 2, 2026
2026 Key Changes and Updates
OBBBA: 100% Bonus Depreciation Made Permanent
The One Big Beautiful Bill Act (July 2025) permanently restored 100% first-year bonus depreciation for qualified property acquired after January 19, 2025. The TCJA phase-down schedule that was reducing the deduction by 20 percentage points per year has been eliminated. Businesses can now deduct the full cost of eligible assets in year one with long-term certainty.
R&D Expensing Restored for Domestic Research
New Section 174A allows immediate deduction of domestic R&D expenses starting 2025. Foreign research costs remain subject to 15-year amortization. Small businesses under $31M in gross receipts can retroactively apply expensing to 2022–2024 by amending returns before July 6, 2026.
QBI Deduction Permanent + Enhanced
The 20% Qualified Business Income deduction for pass-through business owners is now permanent under OBBBA. The income phase-in range was increased, and a minimum $400 deduction is guaranteed for taxpayers with at least $1,000 of QBI starting in 2026.
Social Security Wage Base: $184,500
The 2026 Social Security wage base increased to $184,500, up from $176,100 in 2025. Maximum employer Social Security tax per employee: $11,439. Medicare has no wage cap and continues at 1.45% each for employer and employee.
State Tax Rate Reductions
Several states cut corporate tax rates for 2026: Nebraska to 4.55%, Pennsylvania to 7.49%, North Carolina to 2% (on track to eliminate by 2030). No states raised corporate income tax rates. New Jersey still has the highest rate at 11.5%.
Business Interest Deduction Restored
OBBBA modified Section 163(j), restoring the ability to add back depreciation, depletion, and amortization when computing the adjusted taxable income limit for business interest deductions. This increases deductible interest for capital-intensive businesses.
Frequently Asked Questions
What is the federal corporate tax rate in the US for 2026?
The federal corporate income tax rate is a flat 21% for all C corporations, regardless of income level. This rate was set by the Tax Cuts and Jobs Act of 2017, which reduced it from 35%. It remains unchanged for 2026. State corporate taxes add 0% to 11.5% on top of the federal rate.
What is the difference between C Corp and S Corp taxes?
A C Corporation pays a flat 21% federal tax on profits at the entity level. Dividends to shareholders are then taxed again at individual rates (double taxation). An S Corporation pays no federal entity-level tax - profits pass through to shareholders who report them on personal returns at rates of 10–37%. S Corp owners can also claim the 20% QBI deduction. S Corps are limited to 100 US-resident shareholders.
What is 100% bonus depreciation under OBBBA?
The One Big Beautiful Bill Act permanently restored 100% first-year bonus depreciation for qualified property acquired after January 19, 2025. Businesses can deduct the full cost of eligible equipment, machinery, and software in the year of purchase. A new temporary provision also allows full expensing of qualified production property (manufacturing buildings) placed in service before 2031. Taxpayers may elect a lower 40% or 60% rate if full deduction is not optimal.
How are dividends taxed in the United States?
Qualified dividends paid to US individuals are taxed at preferential rates of 0%, 15%, or 20% depending on income. Ordinary (non-qualified) dividends are taxed at regular income rates up to 37%. Dividends paid to non-resident aliens face a 30% withholding tax, often reduced to 15% by tax treaties. The 3.8% Net Investment Income Tax may also apply to high-income taxpayers.
What employer payroll taxes apply in 2026?
Employers pay FICA taxes of 7.65% on wages: 6.2% Social Security (on wages up to $184,500) plus 1.45% Medicare (no cap). Employees pay the same 7.65%. An extra 0.9% Medicare tax applies to wages above $200,000 (employee only). Federal unemployment tax (FUTA) adds 0.6% on the first $7,000 per employee. Self-employed individuals pay the full 15.3% FICA rate.
When are corporate tax returns due in 2026?
C corporations file Form 1120 by April 15, 2026 (extension to October 15). S corporations file Form 1120-S by March 16, 2026 (extension to September 15). Partnerships file Form 1065 by March 16, 2026 (extension to September 15). Sole proprietors file Schedule C with Form 1040 by April 15. Estimated tax payments for C corps are due quarterly: April 15, June 15, September 15, and December 15.
Is LLC or S Corp better for taxes?
It depends on your income and situation. An LLC taxed as a sole proprietor pays self-employment tax (15.3%) on all active business income. An S Corp lets owners pay themselves a reasonable salary (subject to FICA) and take the rest as distributions (no self-employment tax). S Corps save on payroll taxes but require reasonable compensation and more filings. Both can claim the 20% QBI deduction.
What R&D tax benefits are available in 2026?
OBBBA restored immediate expensing for domestic R&D costs under new Section 174A. Businesses deduct US-based research expenses in the year incurred. Foreign R&D must still be amortized over 15 years. The Section 41 R&D tax credit remains available on top of the deduction. Small businesses under $31M in gross receipts can retroactively apply expensing to 2022–2024 returns.
What states have no corporate income tax?
Six states have no corporate income tax: Nevada, Ohio, South Dakota, Texas, Washington, and Wyoming. However, Nevada, Ohio, Texas, and Washington impose gross receipts taxes instead. Oregon, Montana, New Hampshire, Delaware, and Alaska have no statewide sales tax. Businesses choosing a state must weigh corporate tax, sales tax, property tax, and other costs together.
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