The Tax Cuts and Jobs Act makes significant changes in the tax rates applicable to corporations that pay tax (those that are not pass-through entities).

Prior Law

Through December 31, 2017

Tax rate brackets of C corporations is as follows:

The 38% and 39% were phase-outs to raise the effective rates to a flat 34% or 35%, eliminating the benefit of the lower rate brackets and creating a flat rate.

New Law

Effective for tax years beginning after December 31, 2017

The C corporation tax rate is 21% for all income levels.

Commentary

For large, profitable corporations this can be a significant tax cut. Changes in other credits and deductions will need to be factored in to determine how much actual tax will change. For small corporations that have taxable income under $50,000, federal tax may increase by 40% due to the tax rate increasing from 15% to 21%.

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Doug Wendlandt
I began my career in public accounting in 1978 and became a certified public accountant in 1981. I worked at a public accounting firm for 25 years and then started my own practice. In 2010, Hawkins Ash CPAs acquired my firm in Marshfield and welcomed me as a partner. I am a member of the firm’s Tax Committee.

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