Disclaimer: This calculator provides estimates for educational purposes only. It does not constitute tax advice. Consult a qualified CPA or tax professional for your specific situation.
Calculate your C Corporation tax burden including federal corporate tax (21%), state corporate tax, and double taxation on shareholder dividends. Compare total C Corp tax vs LLC pass-through taxation.
C Corp Tax Calculator
Enter your corporate income, state, and dividend distribution to see the total tax burden including double taxation.
0% for NV, WY, SD, OH, TX, WA
% of after-tax profits paid as dividends
W-2 or other personal income
C Corporation
LLC (Pass-Through)
Double Taxation Explained
The defining tax characteristic of a C Corporation is double taxation. Unlike an LLC where profits pass through to the owner's personal return, a C Corp is a separate taxpaying entity:
Level 1 — Corporate Tax: The corporation pays federal income tax at a flat 21% rate, plus any applicable state corporate income tax, on its taxable income.
Level 2 — Dividend Tax: When after-tax profits are distributed to shareholders as dividends, the shareholders pay personal income tax on those dividends at qualified dividend rates (0%, 15%, or 20%). An additional 3.8% Net Investment Income Tax (NIIT) may apply.
This means the same dollar of profit can be taxed at an effective combined rate of 30–45%, depending on the shareholder's income level and state taxes. The calculator above shows this combined burden for your specific situation.
When Does a C Corp Make Sense?
Despite double taxation, a C Corp structure can be advantageous in specific situations:
Retained Earnings: If you reinvest most profits rather than distributing them, the 21% flat rate may be lower than your personal marginal rate (up to 37%). You only pay the second layer of tax when you distribute.
QSBS Exclusion (Section 1202): Founders of qualifying C Corps can exclude up to $10 million in capital gains when selling stock held for 5+ years. This can make C Corp the most tax-efficient structure for businesses planning an exit.
Venture Capital: VCs and institutional investors strongly prefer C Corp structure for investment, stock option plans, and preferred share classes.
Employee Stock Options: C Corps can offer ISOs (Incentive Stock Options) which have favorable tax treatment for employees.
Fringe Benefits: C Corp shareholders who are employees can receive tax-free fringe benefits (health insurance, group-term life insurance) that are not available to LLC members.
State corporate income taxes vary significantly and can substantially impact your total C Corp tax burden. Here are key rates to know:
State
Corporate Tax Rate
Notes
California
8.84%
$800 minimum franchise tax
New York
7.25%
Metropolitan surcharge may apply
Texas
0% income / 0.75% margin
Margin tax on gross receipts
Florida
5.5%
First $50K exempt
Delaware
8.7%
Popular for incorporation
Nevada
0%
No corporate income tax
Wyoming
0%
No corporate income tax
New Jersey
11.5%
One of the highest
Illinois
9.5%
Includes replacement tax
Pennsylvania
8.99%
Being phased down
QSBS Exclusion (Section 1202)
The Qualified Small Business Stock (QSBS) exclusion under IRC Section 1202 is one of the most powerful tax benefits available to C Corp founders. If you hold stock in a qualifying C Corporation for more than 5 years, you can exclude the greater of $10 million or 10 times your adjusted basis in the stock from capital gains tax.
Requirements:
Must be a domestic C Corporation
Gross assets must not exceed $50 million at the time stock is issued
Stock must be acquired at original issuance (not purchased on secondary market)
Corporation must be an active business (not investment, real estate, banking, farming, or certain service businesses)
Stock must be held for more than 5 years
For LLC owners planning an eventual exit worth $1M+, converting to C Corp early and qualifying for QSBS can save hundreds of thousands or millions in capital gains tax.
Frequently Asked Questions
What is the C Corp federal tax rate?
The federal corporate income tax rate is a flat 21% on all taxable income. There are no graduated brackets for C Corporations. This rate was set by the Tax Cuts and Jobs Act of 2017.
What is double taxation?
Double taxation means C Corp profits are taxed twice: first at the corporate level (21% federal + state), then again when distributed to shareholders as dividends (0%, 15%, or 20% qualified dividend rate, plus potential 3.8% NIIT). The calculator above shows your combined effective rate.
When does a C Corp make sense vs an LLC?
A C Corp may make sense when you plan to retain most profits (taxed at only 21%), want to raise venture capital, qualify for the QSBS exclusion (up to $10M capital gains exclusion), need employee stock options, or your personal marginal rate exceeds 21%. For most small businesses distributing profits, an LLC or S Corp is more tax-efficient.
What is the QSBS exclusion?
Section 1202 allows C Corp founders to exclude up to $10 million (or 10x basis) in capital gains when selling stock held for 5+ years. The corporation must have under $50M in gross assets and be an active business. This is one of the most powerful tax benefits in the US tax code for startup founders.
Do all states tax C Corps?
No. Nevada, Wyoming, and South Dakota have no corporate income tax. Ohio uses a Commercial Activity Tax on gross receipts instead. Texas has a margin tax. Most other states impose corporate income taxes ranging from 2.5% (North Carolina) to 11.5% (New Jersey). See the state rates table above.
How are C Corp dividends taxed?
Qualified dividends are taxed at preferential rates: 0% for income up to $47,025 (single) or $94,050 (MFJ), 15% for most taxpayers, and 20% for high earners above $518,900 (single) or $583,750 (MFJ). An additional 3.8% Net Investment Income Tax applies above $200,000/$250,000 AGI.
Can I convert my LLC to a C Corp?
Yes. You can convert an LLC to a C Corp by filing Articles of Incorporation in your state and electing corporate tax treatment with the IRS (Form 8832). Alternatively, you can form a new C Corp and merge your LLC into it. Consult a tax professional as the conversion may trigger taxable events depending on your LLC's assets and liabilities.
What are the ongoing costs of a C Corp?
C Corps have higher compliance costs than LLCs: corporate tax return (Form 1120) preparation ($1,000–$3,000/year), state franchise taxes and annual reports ($50–$800/year depending on state), board of directors requirements, annual meeting minutes, and potentially more complex accounting if issuing stock or paying dividends.
Related Calculators
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