page_title: Income tax in the United States
section_title: Corporations
hierarchical_section_title: Income tax in the United States / Other taxable and tax exempt entities / Corporations
caption_attribution_description: English: U.S. effective corporate tax rates, 1947–2012
context_page_description: Income taxes in the United States are imposed by the federal, most states, and many local governments. The income taxes are determined by applying a tax rate, which may increase as income increases, to taxable income, which is the total income less allowable deductions. Income is broadly defined. Individuals and corporations are directly taxable, and estates and trusts may be taxable on undistributed income. Partnerships are not taxed, but their partners are taxed on their shares of partnership income. Residents and citizens are taxed on worldwide income, while nonresidents are taxed only on income within the jurisdiction. Several types of credits reduce tax, and some types of credits may exceed tax before credits. An alternative tax applies at the federal and some state levels.
  In the United States, the term "payroll tax" usually refers to FICA taxes that are paid to fund Social Security and Medicare, while "income tax" refers to taxes that are paid into state and federal general funds.
  Most business expenses are deductible.
context_section_description: Corporate tax is imposed in the U.S. at the federal, most state, and some local levels on the income of entities treated for tax purposes as corporations. Shareholders of a corporation wholly owned by U.S. citizens and resident individuals may elect for the corporation to be taxed similarly to partnerships, as an S Corporation. Corporate income tax is based on taxable income, which is defined similarly to individual taxable income.
  Shareholders (including other corporations) of corporations (other than S Corporations) are taxed on dividend distributions from the corporation. They are also subject to tax on capital gains upon sale or exchange of their shares for money or property.  However, certain exchanges, such as in reorganizations, are not taxable.
  Multiple corporations may file a consolidated return at the federal and some state levels with their common parent.
caption: The U.S. federal effective corporate tax rate has become much lower than the nominal rate because of various special tax provisions.
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