US corporate tax rate, incentives, filing dates, and compliance explained

Why expand to the US?

The United States is the world's largest economy with a GDP value of USD $29.2 trillion in 2024. The US also boasts of one of the largest consumer bases with big spending power, top-class infrastructure and logistics, and a diverse and highly skilled workforce.

What's more, the country is revered for its culture of innovation—Silicon Valley being a prime example of this—backed by strong intellectual property safeguards. It's common to see investors support new businesses with ingenious ideas.

For businesses growing their global footprint, US tax credits and other incentives remain a major selling point. However, the US corporate income tax system is multi-layered, and compliance laws are complex. It's imperative for foreign companies to understand its layers and nuances before venturing out to realise their American dream.

Corporate tax in the US

The US imposes a 21% federal corporate tax. States impose their own corporate taxes at varying rates. So, a company's tax burden can vary depending on the state it operates in.

When the federal and state taxes are combined, the statutory rate works out to around 26%.

The Internal Revenue Service (IRS) is tasked with collecting federal taxes and administering the Internal Revenue Code—the main body of US federal statutory tax law.

Corporate income tax is a major money spinner. Corporate income tax represents a significant source of federal revenue, alongside individual income taxes and payroll taxes.

Tax rates and structures

• Federal corporate tax: This is levied at 21% and has been in place since the Tax Cuts and Jobs Act was signed into law in 2018.
  
• State corporate taxes: Additionally, 44 US states and the District of Columbia levy their own taxes on corporate income, typically ranging from 1% to 10%. Some states levy a flat rate while others have tax brackets depending on income levels. New Jersey (11.5%), Minnesota (9.8%), Illinois (9.5%), Alaska (9.4%), and California (8.84%) have the highest top rates. States with the lowest top rates include North Carolina (2.25%), Arkansas and North Dakota (4.3%), Utah (4.55%), Kentucky and South Carolina (5%). Texas, Washington, and Nevada levy a gross receipts tax instead of corporate income tax, while Delaware, Oregon, and Tennessee impose both. South Dakota and Wyoming are the only states that have neither.
  

Business structure also has implications for US corporate tax liability. Let's take a look at prominent business structures and how they are taxed:

• C corporations: This is a type of company owned by shareholders where business income is legally independent of shareholders' assets. C corporations—the most prevalent business structure—are subject to federal corporate income tax at 21%. When these companies distribute profits to shareholders as dividends, the shareholders must pay individual income taxes on the dividend income. Thus, the same income is taxed twice.
  
• S corporations: In this business structure, the company passes on its income, losses, deductions, and tax credits to shareholders. An S corporation doesn't need to pay corporate income tax and is therefore treated as a “pass-through” entity, with profits taxed at the shareholder level.However, S corporations are subject to strict eligibility requirements, including a limit of 100 shareholders, a single class of stock, and the requirement that all shareholders be US citizens or US tax residents. As a result, S corporations are generally not available to foreign-owned businesses or foreign investors expanding into the US.
  

From a tax compliance perspective, C corporations are subject to double tax but are more appealing to investors and have more scope to scale. S corporations are exempt from corporate income tax, but their limitations (restricted to 100 US shareholders and only one stock class) make them less attractive to investors. Foreign corporations expanding to the US must consider these distinctions while weighing their tax liability and growth strategy.

What is taxable income?

In the US, most income, be in the form of money, services, or property, is taxable.

The calculation of federal taxable income is gross income minus allowable deductions. Gross income includes:

• Sales revenue
  
• Employee compensation (salaries, fees, etc)
  
• Income from interest, dividends, royalties, and rent
  
• Income from the sale of capital assets
  

Allowable tax deductions include:

• Salaries and other employee compensation
  
• R&D expenditure
  
• Bad debt
  
• Allowable charitable contributions
  
• State and municipal taxes
  
• Royalties, management service fees, interest, and other payments to foreign affiliates (with limitations)
  
• Foreign-derived deduction eligible income (FDDEI)
  
• Depreciation and amortisation costs
  
• Start-up expenditure (with limitations).
  

Certain income types are legally excluded from federal income tax calculation. These include:

• Tax-exempt interest (interest from municipal bonds)
  
• Gifts and inheritances
  
• Life insurance payouts
  
• Contributions to capital in money or property form.
  

Federal corporate tax considerations

Corporations subject to US federal corporate tax might also be liable to an alternative tax, such as:

• Corporate Alternative Minimum Tax (CAMT): C corporations with average annual adjusted financial statement income exceeding USD $1 billion (USD $100 million for US members of foreign parented multinationals) might have to pay a 15% corporate alternative minimum tax. Eligible corporations must calculate tax liability under both the federal corporate tax and CAMT regimes and pay the higher amount. This tax ensures the tax liability of large corporations doesn't fall under 15% regardless of applicable tax deductions and credits.
  
• Base Erosion and Anti-abuse Tax (BEAT): Another minimum tax aimed at large corporations that might reduce their federal taxable income by leveraging deductible payments to foreign related parties. Corporations with annual gross receipts averaging at least USD $500 million for 3 tax years and a 3% or more base erosion percentage are eligible for BEAT, provided they aren't a regulated investment company (RIC), real estate investment trust (REIT), or S corporation. To calculate, taxpayers must add certain base erosion payments to their federal taxable income and apply the BEAT rate. If tax liability is higher under BEAT, the taxpayer must pay this amount instead.Proposed changes under ongoing tax policy discussions include a higher BEAT rate in future tax years, which would increase the effective tax burden for affected multinationals. Companies meeting the BEAT thresholds should closely monitor legislative developments when planning cross-border payments and transfer pricing structures.
  
• State and local tax (SALT) deductions: For C corporations, state and local income taxes are generally deductible as ordinary business expenses and aren't subject to the USD 10,000 SALT deduction cap, which primarily applies to individuals and pass-through business owners.That said, policymakers continue to debate changes to SALT deduction limits for individuals and pass-through entities operating in high-tax states such as New York and California. Businesses structured as partnerships or S corporations should monitor potential legislative developments, as future changes could materially affect after-tax income.
  

State and local tax considerations

US states use apportionment formulas to determine what portion of a company's income and tax liability can be assigned to a particular state. There are three formulas in use: A three-factor formula that takes account of payroll, property, and sales in equal measure, another three-factor formula that gives sales a different weight, and a single-factor formula that only takes company sales into account.

Apart from state corporate taxes, resident corporations and foreign corporations must also deal with various local taxes:

• Gross receipts taxes: Some states levy a gross receipts tax on total revenue without deductions as opposed to an income tax levied on net income. Many states also authorise their municipalities to levy gross receipts taxes.
  
• Sales and use tax: Tax rates vary from state to state, ranging from 2.9% to 7.25%. Many states also allow local entities (counties, cities) to levy a local percentage in addition to the state-level tax.
  
• Property taxes: Most states impose various property taxes and a tax on business personal property.
  
• Stamp taxes: These are levied at the time of recording a transaction involving real property.
  
• Franchise tax: This is imposed on certain corporations for the privilege of doing business in a particular state. The tax rate might be calculated on the basis of a company's net worth, paid-in capital value, or total revenue, or it might be a flat fee.
  

Tax incentives and tax exemptions

Businesses can lower their US tax liability through the following tax credits:

Foreign tax credit

Corporations paying income tax in a foreign country can claim a tax deduction or tax credit against their US tax liability on the same income. This incentive, aimed at preventing double taxation, is applicable to both US citizens and US tax resident foreigners.

Business credits

The US offers various business credits with the objective of achieving specific economic goals. Examples include:

• Work opportunity tax credit, which incentivises employers to hire individuals from eligible groups that face obstacles to employment. Its aim is to diversify the workforce.
  
• Research and development credit, available to corporations developing new or improved products, manufacturing processes, or software in the US
  
• Disabled access credit for certain eligible small businesses, which is available to small businesses that incur expenses on making structural or other changes to accommodate employees or customers with disabilities.
  

Inbound financial investment incentives

These are tax exemptions offered in a bid to attract foreign investment and expertise. The portfolio debt exception is one such incentive that allows foreign corporations to earn interest income from certain US debt securities without paying corporate income tax or withholding tax on it. Another incentive, called the bank deposit exception, permits foreign investors to hold funds in US banking institutions without paying US tax on interest earned.

Various other incentives are available in the form of tax holidays, abatement of property and sales and use taxes, utility rate reductions, and cash grants at the federal, state and local government levels. By leveraging these, resident and foreign corporations can reduce their net taxable income significantly.

Credit unions and special tax rules

Credit unions enjoy a special tax status in the US. They're exempt from paying corporate income tax on account of their not-for-profit structure. As per the Internal Revenue Service, this tax exemption is available to both federal and state credit unions. These credit unions are also exempt from filing annual information returns.

When to file taxes

Annual corporate income tax returns are due by the 15th of the fourth month after the end of the tax year, with the possibility of a six-month extension. Companies are free to pick a tax year different from the calendar year.

Tax payments must be prepaid in four instalments due on April 15, June 15, September 15, and December 15 for those following the calendar year. For a different type of tax year, payments are due on the 15th of the fourth, sixth, ninth, and twelfth months of the tax year.

Payments must be made in US dollars, preferentially through the IRS' Electronic Federal Tax Payment System.

Reducing tax burden with double taxation agreements

The United States has tax treaties in place with several countries to prevent double taxation and tax evasion. If your country has an agreement with the US, it can considerably lower or even eliminate your tax liability on certain types of income—including dividends, interest, and royalties—received from outside the US.

However, it must be noted that some US states don't honour US tax treaty provisions. Foreign corporations are advised to consult the tax authorities of the applicable state for clarity.

Singapore doesn't have a comprehensive double taxation agreement with the US, just a limited treaty governing income from the operation of aircraft and ships.

Other taxes to take note of

• Withholding tax: Foreign individuals or companies receiving certain types of US-sourced passive income—such as dividends, interest, royalties, and licence fees—are generally subject to a 30% federal withholding tax, which is withheld at source by the payer.This withholding tax typically applies to income that's not effectively connected with a US trade or business, and reduced rates or exemptions may be available under applicable US tax treaties.
  
• Customs duties and import tariffs: Certain imports into the US are subject to customs duties, with rates varying depending on product classification, country of origin, and applicable trade programmes. Preferential rates may apply under free trade agreements and special tariff regimes, while additional duties can be imposed in specific trade remedy cases such as anti-dumping or countervailing duty investigations.
  
• Excise taxes: Both federal and state governments impose excise taxes on certain goods (gasoline, kerosene, etc). Excise taxes are applicable to specific activities too, such as manufacturing and/or importing certain goods (sporting goods, firearms, ammunition, alcohol, tobacco). Tax rates depend on the type of goods and activities.
  
• Payroll taxes: These include a federal unemployment tax, social security tax, and medicare tax, calculated as a specific percentage of wages up to a certain level.
  
• Environmental taxes: Companies that import, manufacture, or sell ozone-depleting chemicals (ODCs), as well as imported goods made using ODCs, attract environmental taxes.
  

Historical tax rates and recent reforms

Before 2018, the US followed a complex and graduated corporate tax structure. From 1993 to 2017, corporate income tax was levied on eight income brackets, with the lowest rate being 15% and the highest 35%. The US federal tax rate reached its peak in 1968 at 52.80%.

In recent months, the US corporate tax system has undergone numerous changes:

• A slew of new import tariffs were announced as part of President Donald Trump's America First Trade Policy.
  
• The BEAT rate was increased.
  
• More allowable deductions were brought under the foreign-derived deduction eligible income.
  

Since the introduction of the flat 21% federal corporate tax rate under the Tax Cuts and Jobs Act, the core structure of the US corporate tax system has remained largely stable. While corporate tax reform continues to be debated—particularly around minimum taxes, investment incentives, and the treatment of research and development expenses—most proposed changes haven't yet been enacted into law.

Businesses expanding into the US should therefore plan based on current legislation, while monitoring potential policy developments that could affect corporate tax rates, deductions, and cross-border tax rules in the future.

Tax compliance and registration

Best practices for tax compliance in the US:

• Apply to the Internal Revenue Service for a federal Employer Identification Number (EIN) after incorporation and register with the relevant state and local tax authorities.
  
• Remember tax filing deadlines.
  
• Choose the correct income tax return form. Resident corporations generally file Form 1120, while foreign corporations use Form 1120-F. Corporate income tax-exempt S corporations are still required to file annual information returns using Form 1120-S.
  
• Remember the four deadlines for making estimated tax payments through the tax year.
  
• Strictly adhere to the Internal Revenue Code when reporting and paying taxes to avoid delinquency penalties, accuracy-related penalties, information reporting penalties, and preparer, promoter, and frivolous-filing penalties. Apart from these civil penalties, criminal penalties apply for more serious offences.
  
• Stay informed about international, federal, and state tax laws and keep accurate and complete records to reduce the risk of audits.
  

How Aspire supports your expansion to the US

Aspire provides smart solutions for global business' international payment problems, helping them transfer funds safely, quickly, and inexpensively while staying tax-compliant.

• Our multi-currency business account supports payments in 30+ major currencies across more than 130 countries, ensuring that you can pay your suppliers, partners, and clients in any part of the world. One account is all it takes to build, run, and scale your business in the US.
  
• Our business account comes with market-leading exchange rates, transparent pricing with no hidden fees, and no initial deposit or minimum balance requirements.
  
• On our global payments platform, you can make same-day transfers in 15+ currencies, ensuring that you never miss a payment deadline.
  
• On Aspire's all-in-one fintech stack, you gain access to unlimited virtual corporate cards, automated accounting and integrations that help you close your books faster, and 24/7 support to ensure your business moves without pause.
  

Frequently asked questions

What is the current corporate tax rate in the US?

The current US federal corporate tax rate is 21%. State corporate income taxes range from 1% to 10%.

Is the US corporate tax 35?

No, the US levies a flat 21% tax on federal taxable income.

Which country has the highest corporate tax rate?

Comoros in Southeastern Africa has a corporate tax rate of 50%, the highest in the world in 2025.

Which US state has the highest corporate tax?

New Jersey has the highest state corporate income tax rate at 11.50%.

When did the US corporate tax rate change to 21%?

The US imposed a flat 21% federal corporate tax rate in 2018 following the Tax Cuts and Jobs Act being signed into law.

What is the lowest US corporate tax rate ever?

The lowest ever US federal corporate tax rate was 1% in 1910.