Corporations in the United States face a federal corporate income tax of 21 %. State-level taxes vary widely, creating a combined tax burden that can differ dramatically from one jurisdiction to another.
State corporate tax structures (2026)
| Tax structure | States / jurisdictions |
|---|---|
| Flat corporate income tax (31 states + DC) | – |
| Graduated corporate income tax (13 states) | – |
| Gross receipts tax only (no corporate income tax) | Nevada, Ohio, Texas, Washington |
| Both corporate income tax and gross receipts tax | Delaware, Oregon, Tennessee |
| Local‑level gross receipts tax only | Pennsylvania, Virginia, West Virginia |
| No corporate income tax or gross receipts tax | South Dakota, Wyoming |
Rate ranges
- State top marginal corporate income tax rates range from 2.0 % in North Carolina to 11.5 % in New Jersey.
- When combined with the federal rate, the highest overall burden is in New Jersey at 30.1 %.
- States with combined rates at or above 28 % include Alaska, Illinois, Maine, and Minnesota.
- Six states—Ohio, Nevada, South Dakota, Texas, Washington, and Wyoming—have no state corporate income tax, so their combined rate is the federal 21 % (though four of these impose gross receipts taxes).
Interaction between state and federal taxes
- Corporations can deduct state corporate income tax from federal taxable income, lowering the effective federal rate.
- Example: A firm paying Rhode Island’s 7 % flat corporate tax can deduct that amount, reducing its effective federal rate to 19.53 % and yielding a combined rate of 26.53 %.
- Some states allow deduction of federal corporate tax against state liability:
- Alabama – full deductibility.
- Missouri – 50 % deductibility.
Overall average
Including states that impose no corporate income tax, the average combined state‑and‑federal corporate tax rate across the United States is 25.5 %.
Implications
- The variation in combined rates influences business location decisions and overall tax competitiveness.
- States with high combined rates may face pressure to reform corporate taxation to attract and retain firms.
Source article: taxfoundation.org
