Combined State and Federal Corporate Income Tax Rates in 2026

Corporations in the United States pay federal corporate income taxes levied at a 21 percent rate. Forty-four states and DC also levy taxes on corporate income, with top marginal rates ranging from 2.0 percent in North Carolina to 11.5 percent in New Jersey. Thirteen states levy graduated corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. rates, while 31 states and DC levy a flat rate on corporate income.  

In Nevada, Ohio, Texas, and Washington, corporations are subject to gross receipts taxes instead of corporate income taxes. Delaware, Oregon, and Tennessee impose a taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. on corporate income and a separate levy on gross receipts. Pennsylvania, Virginia, and West Virginia levy gross receipts taxes at the local (but not state) level too. Two states, South Dakota and Wyoming, levy neither a corporate income tax nor a gross receipts taxGross receipts taxes are applied to a company’s gross sales, without deductions for a firm’s business expenses, like compensation, costs of goods sold, and overhead costs. Unlike a sales tax, a gross receipts tax is assessed on businesses and applies to transactions at every stage of the production process, leading to tax pyramiding.. 

The state with the highest combined corporate income tax rate is New Jersey at 30.1 percent. In Alaska, Illinois, Maine, and Minnesota, corporations face combined corporate income tax rates at or above 28 percent. Six states—Ohio, Nevada, South Dakota, Texas, Washington, and Wyoming—levy no state corporate income tax and only face the federal tax rate of 21 percent (although four of these states levy statewide gross receipts taxes).

Corporations may deduct state corporate income tax paid against federal taxable incomeTaxable income is the amount of income subject to tax, after deductions and exemptions. Taxable income differs from—and is less than—gross income.  , lowering the effective federal corporate income tax rate. For example, a corporation subject to Rhode Island’s corporate income tax may deduct tax paid at a 7 percent flat rate against the 21 percent federal corporate income tax, reducing its federal rate to 19.53 percent, for a combined rate of 26.53 percent.   

Additionally, two states allow corporations to deduct federal corporate income tax against some portion of state corporate income tax. Alabama allows full deductibility of federal corporate income tax liability against state liability, while Missouri permits a 50 percent deduction of federal corporate income tax liability. This lowers the effective corporate income tax rate faced by corporations in these states.   

Overall, including the states that impose no corporate income taxes, the average combined state and corporate tax rate imposed in the US is 25.5 percent.    

When examining tax burdens on businesses, it is important to consider both federal and state corporate taxes. Corporate taxes are one of the most economically damaging ways to raise revenue and are a promising area of reform for states to increase competitiveness and promote economic growth, benefiting both companies and workers.