Corporate Taxes in the USA

Corporate Tax in the USA is a significant part of national income yearly. The tax has evolved through many policies, Acts, administration, and days.

In the United States, corporate tax is levied by all levels of government, although some state and even local governments do not. And just like those of personal tax, the amount taxed is determined by the amount of gross income earned by companies over the period of one business year.

Presently, the corporate tax rate stands at 21 percent, and it was instituted by the passage of the Tax Cuts and Jobs Act of 2017. It took effect on the 1st of January, 2018. But before then, the rate was about 35%. It had once hit an all-time high of 52.80 percent in 1968 and was once as low as 1 percent in 1910.

I should mention that not all corporate formations are taxable. Entities like business mergers, business acquisitions formation, and liquidations are not taxable by the government. Even shareholders of corporations are not usually directly taxed, especially on dividends distributed by the corporation. But they have the duty to pay tax on dividends paid by the corporation. The foreign tax credit is granted to corporations that are still under the jurisdiction of foreign income taxes.

Some states adhere to the federal government’s dictates on taxable income and rate, while others don’t. Some make up their formulas for taxing, and it is sometimes based on ratios of property, on payroll, and other times, on the sales of the corporation within the state. Below is a table showing State corporate income tax rates in the United States.