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What are the 2025 corporate tax rates for American businesses? Whether you’re currently operating a business or about to launch, it’s essential to understand this year’s rates, and the many questions surrounding the Tax Cuts and Jobs Act (TCJA) provisions that was set to expire at the end of 2025. Considering your corporate taxes while planning for the year ahead is crucial to minimize your 2025-26 tax burden.
Notable corporate income tax changes in 2025
Did the corporate tax rate change? Review notable changes and issues surrounding the federal and state corporate tax rate.
Federal
The flat 21% federal corporate income-tax rate is unchanged. The new One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, made several TCJA business incentives permanent. For example, full expensing for R&D and an expanded, permanent §199A pass-through deduction. However, this new bill did not alter the 21% rate.
State
2025 saw a mix of rate cuts and a few increases:
- Louisiana cut to a flat 5.5% (was 7.5%).
- Nebraska adopted a flat 5.20% (down from 5.84%) and scheduled future reductions.
- North Carolina lowered its rate to 2.25% on the path to full repeal by 2030.
- Pennsylvania continued its phasedown to 7.99%.
- New Mexico moved to a single 5.9% rate (previously 4.8% / 5.9%).
- New Jersey re-imposed a 2.5% surtax on large corporations, lifting the top effective rate to 11.5%.
How Will Corporate Income Tax Rates Change After TCJA Expires?
Several individual provisions still sunset after December 31, 2025, but the 21% corporate rate is permanent law. Congress is debating whether to pair any future corporate-rate change with additional business incentives in 2026, but no rate bill is on the President’s desk as of mid 2025.
With 1-800Accountant's small business tax advisory services, your business can stay prepared for all of the incoming tax changes.
Federal corporate income tax rate
Since 2018, the federal corporate tax rate has been 21%. This rate applies to taxable income, a small business's revenue minus expenses.
Calculating your federal corporate income tax burden is simple. In this example, the annual revenue is $100,000, and the expenses are $20,000.
1) Subtract expenses from your revenue.
$100,000 - $20,000 = $80,000 in taxable income.
2) Multiply your taxable income by the federal tax rate.
$80,000 x .21 = $16,800 you owe in federal corporate taxes.
State corporate income tax rate
Most businesses do not pay corporate income taxes because they are pass-through entities, including limited liability companies (LLCs) and partnerships. Businesses with this status pass income and deductions to the business owners, who must report their distributions on their personal income tax returns. If your business entity lacks a pass-through taxation feature, such as those formed as C corporations, you will likely be responsible for paying corporate income taxes both state and federally. While most states have a corporate income tax, South Dakota and Wyoming don't have any corporate tax.
Use this chart to determine your state's corporate tax rate for 2024.
| State | Tax Rate |
|---|---|
6.5% | |
0% – 9.4% | |
4.90% | |
1% – 4.3% | |
8.84% | |
4.4% | |
7.5% - 8.25% | |
8.25% | |
8.7% | |
5.5% | |
5.39% | |
4.4% – 6.4% | |
5.695% | |
9.5% | |
4.9% | |
5.5% – 7.1% | |
3.5% – 6.5% | |
5% | |
5.5% | |
3.5% – 8.93% | |
8.25% | |
8% | |
6% | |
9.8% | |
4% – 5% | |
4% | |
6.75% | |
5.2% | |
GR Tax Only | |
7.5% | |
6.5% – 11.5% | |
5.9% | |
6.5% – 7.25% | |
2.25% | |
1.41%-4.31% | |
GR Tax Only | |
4% | |
6.6% – 7.6% | |
7.99% | |
7% | |
5% | |
None | |
6.5% + GR | |
GR Tax Only | |
4.55% | |
6% – 8.5% | |
6% | |
GR Tax Only | |
6.5% | |
7.9% | |
None |
Tax strategies to reduce your corporate income tax liability
Embrace these great strategies to reduce your business's corporate income tax liability.
- Review Business Structure. The first step to reducing corporate income tax liability is reviewing how your small business is structured. The correct entity classification for your small business situation will positively impact your annual tax burden.
- Tax Deductions and Credits. The second step is to select applicable tax deductions and credits. Keep more of your money in your pocket with every deduction and credit your business is eligible for.
- Tax Planning and Management. The third step is to embrace proper tax planning and management for your small business. If you properly plan and manage your taxes for the fiscal year, you will continue to minimize your small business tax burden.
Work with a tax professional
Growing your business while managing state and federal corporate tax responsibilities can be difficult and time-consuming. And you invite more work and headaches if you make a serious mistake or miss a tax due date. That's why so many business owners and entrepreneurs trust 1-800Accountant, America's leading virtual accounting firm, for their professional accounting needs.
Whether it's business tax advisory, small business taxes, or any of our professional services, we have the solution you need at a price that works for you. Schedule a quick consultation – usually 30 minutes or less – to learn how we can help.
Corporate Tax FAQ
How do pass-through entities’ federal taxes work?
Pass-through entities are not taxed at the federal level on business income. Instead, profits are passed through to ownership to be handled on their individual income tax returns. Generally, the personal income tax rate is more favorable than a federal corporate tax rate for owners.
What are non-taxable corporate transactions?
Certain corporate transactions are considered non-taxable, meaning some business activities are not subject to taxation. Corporate acquisitions where the buyer pays a seller mostly in stock are considered one of the more common examples of a non-taxable transaction.
What is the TCJA?
The TCJA, or Tax Cuts and Jobs Act, is the landmark federal tax overhaul signed on December 22 2017 (Public Law 115-97). It permanently slashed the corporate rate from 35% to 21%, introduced a 20% §199A deduction for pass-through income, and shifted the U.S. toward a territorial business-tax system. Most individual-side benefits (lower brackets, doubled standard deduction, $10k SALT cap, larger child credit, and the §199A deduction) sunset after December 31 2025, so Congress must act for them to continue. The 21% corporate rate and most international provisions are already permanent law.
Is there any pending legislation that will change tax rates in 2025?
As of July 28, 2025, no bill has advanced far enough to affect the 21% federal corporate rate that applies to 2025 income. Proposals such as the FairTax Act of 2025 (H.R. 25)—which would replace income taxes with a national sales tax—and scattered bills to raise or lower the corporate rate remain introduced but not enacted.
How did the One Big Beautiful Bill Act affect business tax rates for 2025?
It did not change the federal corporate rate, which stays at 21%. Instead, OBBBA made several temporary TCJA business incentives permanent (100 % expensing for R&D and equipment, interest-deduction flexibility, etc.) and tweaks some international-tax percentages starting in 2026. So your C-corp still faces the same 21% headline rate for the 2025 tax year.
What is withholding tax?
The money employers deduct from their W-2 employees' gross wages and pay directly to the government is known as a withholding tax. The withheld amount functions as a credit to be applied to a W-2 employee's federal income taxes. W-2 employees will receive a tax refund if too much money is withheld throughout the fiscal year and may owe the Internal Revenue Service (IRS) if too little is taken out.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.