C Corporation Interactive Tax Guide
Exploring the unique financial advantages of the C Corp structure.
A Simple, Flat Tax Rate
Unlike other structures with progressive tax brackets, C Corporations benefit from a single, flat federal tax rate on their net profits. This predictability can be a major advantage for highly profitable or growing businesses.
Federal Corporate Tax Rate
21%
Calculated on Schedule J, Line 1a
Powering Growth with Deductions
C Corps can deduct a wide array of business expenses. A key advantage is the ability to fully deduct the cost of employee fringe benefits, like health insurance, reducing taxable income while attracting talent.
Health Insurance Deduction Calculator
Total Deductible Expense:
$60,000
Potential Tax Savings at 21%:
$12,600
This deduction is part of Employee Benefit Programs on Form 1120, Line 24.
The Dividends-Received Deduction (DRD)
When one corporation invests in another, the DRD prevents the same money from being taxed three or more times. It's a key benefit for corporate holding structures. Click through the steps to see how it works.
Subsidiary Corp
Profit: $100,000
Tax (21%): ($21,000)
Pays Dividend:
$10,000
Parent Corp
Receives Dividend:
$10,000
DRD (50%): ($5,000)
Taxable Portion: $5,000
Tax Impact
Taxable Dividend:
$5,000
Tax (21%):
($1,050)
The DRD is calculated on Form 1120, Schedule C.
Carry Losses Forward (NOL)
If your corporation has a loss in one year (a Net Operating Loss), you can carry it forward indefinitely to reduce profits in future years, smoothing out tax liability over the business cycle.
The NOL Deduction is claimed on Form 1120, Line 29a.
The Dollar-for-Dollar Power of Tax Credits
Like deductions, tax credits reduce what you owe. But credits are far more powerful, reducing your final tax bill directly, dollar-for-dollar.
$5,000 Deduction
Reduces your taxable income.
👇
Tax Savings at 21% rate:
$1,050
$5,000 Tax Credit
Reduces your final tax bill.
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Tax Savings:
$5,000
Credits are claimed on Form 1120, Schedule J, Line 5.
