Which tax rate applies to corporations using Form 1120?

The tax rate that applies to corporations using Form 1120 is 21%. This rate was established by the Tax Cuts and Jobs Act (TCJA) in 2017, which significantly lowered the corporate tax rate from previous levels. Under this law, corporations are taxed at a flat rate of 21% on their taxable income.

This change was intended to promote economic growth by making U.S. corporations more competitive globally, as prior tax rates had created disparities in tax liability compared to other countries. Understanding the corporate tax rate is essential for community association managers, especially when dealing with budgeting and financial planning for associations that may have incorporated entities or need to be aware of taxation on their activities.

The other options reflect previous tax brackets or higher historical rates, which are no longer applicable after the tax reform changes.