Professional services
Corporate Tax Calculator
Estimates corporate tax, where the second layer on distributions is the part that gets left out.
Result
Not tax advice. Entity choice, reasonable compensation, pass-through deductions and state treatment interact in ways that depend entirely on your circumstances, and the rules change annually. This estimates a set-aside; the decision belongs with an accountant. C corporation profit is taxed at the entity and again on distribution, which is why most small businesses choose a pass-through structure. Retained earnings avoid the second layer until they are distributed, and there are accumulated earnings rules limiting how long that can continue. State treatment varies widely and some states impose franchise taxes regardless of profit.
Get a Free Business AuditHow the calculation works
A C corporation pays federal income tax on its taxable income at the corporate rate, which has been a flat rate rather than graduated since the 2017 changes. Profit distributed to shareholders as dividends is then taxed again on their returns, which is the double taxation the structure is known for. State corporate tax applies on top and varies widely, including states with no corporate income tax and states with gross receipts taxes instead.
What moves the number
- Taxable income after deductions, which differs from book profit.
- Whether profit is retained or distributed as dividends.
- Salaries to owner-employees, which are deductible to the corporation.
- State corporate tax, which varies enormously.
Where this one goes wrong
Comparing a corporate rate against a personal rate and concluding the corporation is cheaper ignores the second layer, and the comparison only holds for profit that stays in the business. Where the owner needs the money, the combined corporate and dividend tax is the figure to compare. Reasonable salary to an owner-employee is deductible and taxed once, which is why compensation planning matters here. Taxable income also differs from book profit through depreciation and other timing differences, so the starting figure needs care.
Before you quote
- Compare combined corporate and shareholder tax, not the corporate rate alone.
- Start from taxable income, not book profit.
- Add state corporate or gross receipts tax, which varies by state.
Where the rules come from
Questions
About this calculator
Is a C corporation cheaper on tax?
Only for profit that stays in the business. Once it is distributed as dividends it is taxed again on the shareholder's return, so the comparison against a pass-through has to use the combined figure rather than the corporate rate alone.
What is double taxation?
The corporation pays tax on its income, then shareholders pay tax on dividends from that already-taxed income. Salary to an owner-employee avoids it because it is deductible to the corporation and taxed once to the recipient, which is why compensation planning matters.
Does taxable income equal my profit?
Usually not exactly. Depreciation methods, timing differences and items that are not deductible all separate book profit from taxable income, sometimes substantially. Starting from the wrong figure makes every number after it wrong, which is a reason to have the return prepared properly.
The formula
corporate tax on profit, then shareholder tax on whatever is distributed from what remains
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How to use this calculator
- Corporate profit before tax ($). Enter your own figure; the page starts at $400,000.
- Corporate tax rate (%). Enter your own figure; the page starts at 21%.
- State corporate rate (%). Enter your own figure; the page starts at 6%.
- Share distributed as dividends (%). Enter your own figure; the page starts at 60%.
- Shareholder dividend rate (%). Enter your own figure; the page starts at 15%.
The result updates as you type, so you can try a figure, see what it does to total tax, both layers, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Corporate profit before tax | $400,000 |
| Corporate tax rate | 21% |
| State corporate rate | 6% |
| Share distributed as dividends | 60% |
| Shareholder dividend rate | 15% |
What comes out
| Result | Value |
|---|---|
| Total tax, both layers main result | $134,280 |
| Corporate tax | $108,000 |
| Profit after corporate tax | $292,000 |
| Tax on dividends | $26,280 |
| Shareholder receives | $148,920 |
| Combined effective rate | 33.57% |
Corporate tax of $108,000 leaves $292,000. Distributing 60 of it triggers another $26,280, so total tax is $134,280, an effective 33.57%. That second layer is what people mean by double taxation.
How sensitive the answer is
Holding everything else steady and changing only corporate profit before tax, this is what happens to total tax, both layers. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Corporate profit before tax ($) | Total tax, both layers |
|---|---|
| $200,000 | $67,140 |
| $300,000 | $100,710 |
| $400,000 example above | $134,280 |
| $600,000 | $201,420 |
| $800,000 | $268,560 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Corporate profit before tax ($)
- A money amount, starting at $400,000.
- Corporate tax rate (%)
- A percentage, between 0 and 50, starting at 21%.
- State corporate rate (%)
- A percentage, between 0 and 15, starting at 6%.
- Share distributed as dividends (%)
- A percentage, between 0 and 100, starting at 60%.
- Shareholder dividend rate (%)
- A percentage, between 0 and 40, starting at 15%.
What the results tell you
| Result | What it is |
|---|---|
| Total tax, both layers | The headline result. A money figure. |
| Corporate tax | A money figure. |
| Profit after corporate tax | A money figure. |
| Tax on dividends | A money figure. |
| Shareholder receives | A money figure. |
| Combined effective rate | A percentage. |
Keep going
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