Corporate Tax in the United States

Overview by
Tax Base For Resident and Foreign Companies
Corporate income is taxed at the federal, state and sometimes at the municipal levels. Income is taxed during the year that it is earned and again when it is distributed to the shareholders.

The income of a Corporation is taxed twice, once at the level of the corporation as a separate entity, and a second time at the shareholder level when profits are distributed by means of dividends.

Tax Rate

Taxes levied by States and municipalities vary. Click here for more information about corporate tax rate. Tax is levied at a graduate rate from 15% on every dollar up to USD 50,000 to a flat rate of 35% for USD 18,333,333 and over.
Tax Rate For Foreign Companies
From 15% to 35%. The U.S. subsidiary of a foreign corporation is treated as a domestic U.S. corporation for federal tax purposes and its income from worldwide sources is subject to taxation.

The second level of taxes is on dividends received by shareholders: when a U.S. subsidiary pays a dividend to its foreign parent corporation, this dividend is subject to a 30% federal withholding tax rate or a lower rate provided for by treaty.

Foreign manufacturing companies located in countries that are not members of an Agreement on Government Procurement (GPA) receiving Government disbursements are submited to a 2% excise fee.
Capital Gains Taxation
Capital gains are combined with ordinary income, and taxed at the same rates as corporate income.
Main Allowable Deductions and Tax Credit
- An exemption amount for the taxpayer, the spouse, each child, and any other qualified dependents, and certain disabilities,
- Mortgage interest paid on one's primary residence or other residence,
- Equity loan or Line of Credit interest,
- Charitable contributions to eligible entities,
- Business deductions, such as mileage, related to an individual's expenses regarding their employment,
- Business startup and operation, and farming expenses (including travel, meals), not to exceed business income,
- Union and professional dues,
- Medical expenses above a certain percentage of the individual's Adjusted Gross Income (AGI),
- The cost of tax advice, software, and books,
- Moving expenses, in some cases,
- Job search expenses as one searches for work in the same industry,
- Educational expense (but only if it does not prepare one for a new career).
Other Corporate Taxes
In addition to Federal taxes, States and municipal taxes vary from one state or community to another.

Country Comparison For Corporate Taxation

  United States OECD Germany
Number of Payments of Taxes per Year 11.0 14.2 16.0
Time Taken For Administrative Formalities (Hours) 187.0 199.3 215.0
Total Share of Taxes (% of Profit) 46.8 43.0 48.2

Source: Doing Business

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

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