Summary

C-corporation (“C-corp”) taxes in 2025 are built around a flat 21% federal corporate income tax, strict rules for deductions, and timing requirements that trip up a lot of startups. This guide translates the most-used corporate rules into plain English—with direct links to the IRS—so founders can avoid surprises and plan smarter.

Keep an eye out for Part 2 next: Corporate AMT and Other Special Taxes.

Why this matters (Problem → Agitate → Solution)

You formed a C-corp for venture funding or to pursue QSBS, but now you’re staring at Form 1120, estimated payments, and deduction limits. Miss a deadline or misclassify a payment and you can trigger penalties or lose deductions. This article gives you the essential C-corporation tax rules for 2025—what’s deductible, what’s limited, what’s due when—so you can stay compliant and minimize tax friction. Internal Revenue Service

The C-Corp Basics Founders Must Know

1) The corporate tax rate is a flat 21%

Since 2018, federal corporate income is taxed at 21% (IRC §11). This is not indexed for inflation. Legal Information InstituteInternal Revenue Service

Who files and when? C-corps file Form 1120 by the 15th day of the 4th month after year-end (April 15 for calendar-year corps). File Form 7004 for an automatic extension (filing extension ≠ payment extension). Internal Revenue Service

2) Double taxation in a nutshell

C-corp profits are taxed at the corporate level; shareholder dividends are taxable to individuals and are not deductible by the corporation. For investors, dividends are typically taxable (ordinary vs. qualified). Internal Revenue Service+1

Founder tip (comp vs. dividends): Wages to shareholder-employees are deductible only if “reasonable compensation” for services (Treas. Reg. §1.162-7). Excessive “wages” risk reclassification as nondeductible dividends. Legal Information Institute

3) Quarterly estimated tax payments

If you expect $500+ of tax for the year, you generally must make four installments—due the 15th day of the 4th, 6th, 9th, and 12th months of your tax year (April/June/Sept/Dec for calendar filers). Use Form 1120-W to compute amounts. Penalties apply if you underpay. Internal Revenue Service+2Internal Revenue Service+2

4) What counts as income, and key special deductions

  • Dividends Received Deduction (DRD): To mitigate multiple layers of corporate tax on inter-corporate dividends, corporations may deduct 50% of certain dividends from <20%-owned domestic corps; 65% for ≥20%-owned; and 100% in limited cases. See Form 1120 Schedule C details. Internal Revenue Service
  • Charitable contributions (C-corps): Generally limited to 10% of taxable income, with a 5-year carryforward for the excess. Internal Revenue Service
  • Net Operating Losses (NOLs): NOLs arising in tax years after 2017 generally carry forward indefinitely but can offset only up to 80% of taxable income in a future year (certain exceptions apply). Internal Revenue Service
  • Business interest expense (Section 163(j)): Deduction generally limited to 30% of adjusted taxable income (ATI) plus business interest income (exceptions for small businesses under the gross receipts test). See Form 8990. Internal Revenue Service+1
  • Startup & organizational costs: You may be able to deduct a portion in the first year and amortize the remainder; see the Form 1120 instructions section on start-up/organizational costs. Internal Revenue Service

5) Small business “gross receipts test” (cash method & interest-limit relief)

For tax years beginning in 2025, you’re a “small business taxpayer” if your average annual gross receipts for the prior three years do not exceed $31 million (aggregated with certain related entities). Thresholds are indexed annually. This can allow the cash method of accounting and exemption from the §163(j) interest limitation. Internal Revenue Service

6) Filing mechanics that trip teams up

7) Planning corner for founders

  • QSBS (Section 1202): Organizing as a C-corp can unlock potential up to 100% exclusion of gain on qualified small business stock held >5 years (shareholder-level benefit; complex eligibility). Consider at formation and during financing. Internal Revenue ServiceLegal Information Institute
  • QBI reminder: The §199A QBI deduction does not apply to C-corp income (it’s for pass-through owners). Internal Revenue ServiceLegal Information Institute
  • State angle (example: Texas): States vary. Texas has no corporate income tax but imposes a franchise (margin) tax with report due May 15; thresholds and forms change periodically—check the Comptroller’s site. (We use Texas as our state example in this series.) comptroller.texas.gov+1

Quick Checklist (save this)

FAQs

Do founders get the QBI deduction on C-corp earnings?
No. §199A explicitly excludes C-corporation income from the QBI deduction. Legal Information Institute

If we paid “bonuses” to owners, are they always deductible?
Only if they’re reasonable compensation for services—otherwise the IRS can recharacterize them as nondeductible dividends. Legal Information Institute

Can our NOL wipe out 100% of this year’s taxable income?
Post-2017 NOLs generally offset up to 80% of taxable income (with special exceptions). Internal Revenue Service

We own <20% of another U.S. corporation and received dividends. Any relief?
Potential 50% DRD (65% if ≥20% ownership), subject to holding-period and other rules. Internal Revenue Service

Keep an eye out for Part 2: Corporate AMT, book-minimum tax, and other special taxes founders should watch.