How C-corp taxation works
A C-corporation is a separate taxpayer. It pays a flat 21% federal corporate income tax on its profit, regardless of the owner's personal bracket.
When the after-tax profit is paid out as dividends, shareholders pay tax again — typically 15% (or 20% for high earners) on qualified dividends. That second layer is the famous 'double taxation'.
Profit kept inside the company (not distributed) avoids the dividend layer, which is why some C-corps retain earnings.
When a C-corp makes sense
Despite double taxation, the flat 21% rate can suit businesses that reinvest profit, want outside investors, or offer certain fringe benefits.
For most small owner-operators who take the profit home, a pass-through (LLC or S-corp) is usually lighter on tax — compare with those calculators.
What this simplifies
This uses the 21% federal rate and a 15% qualified-dividend rate. It excludes state corporate tax, the net investment income tax, salaries paid to owners, and deductions.
This is a federal estimate using 2025 tax-year figures and the inputs you provide. It does not include state tax, credits, or every deduction. Confirm with the IRS or a tax professional before filing.
Frequently asked questions
What is the C-corp tax rate?
The federal corporate income tax is a flat 21%. Distributed profit is then taxed again at the shareholder's dividend rate, usually 15% or 20%.
What is double taxation?
A C-corp's profit is taxed once at the corporate level (21%), then again when paid out as dividends to shareholders. Pass-through entities are taxed only once.
How do I avoid double taxation?
Retaining earnings (not distributing) avoids the dividend layer, and paying owner salaries shifts income out of the corporation. Many small businesses instead elect S-corp status.
Is a C-corp better than an S-corp?
It depends. C-corps suit reinvestment and outside investment; S-corps usually mean less total tax for owners who take the profit personally. Compare both calculators.