Nevada Corporate Tax Rate: Everything You Need to Know
The Nevada corporate tax rate does not include income tax at the state level.3 min read
2. Nevada Business Tax
3. Nevada Nonprofit Tax Exemptions
4. Federal Corporate Income Tax Brackets 2018
Updated November 6, 2020:
Nevada Corporate Income Tax Brackets
Since there is no corporate income tax, Nevada is an attractive state for starting and incorporating a company. However, corporations operating in the state still must pay corporate income tax at the federal level. State income tax is not levied by the state to corporate bodies, individuals, or businesses. The state sales tax rate is 6.85 percent. Additional taxes can be applied to businesses, taking the taxes to as high as 8.1 percent.
Nevada Business Tax
The corporate income tax on a business operating in Nevada is applied to the gross taxable income of the majority of corporations and businesses operating or registered within the state. This is the equivalent of personal income tax, which is based on a system of tax brackets.
A company must file its tax return annually, similar to what an individual must do every year. Deductions allowed include:
- Cost of sold goods
- Other business expenses
Most businesses that operate in the state that aren't registered as one of the pass-through entities (including S corporations, partnerships, and sole proprietorships) are required to pay federal and state taxes on reported income and earnings. A C corporation must pay its corporate taxes on its revenue. Additionally, the owners and shareholders in the corporation are responsible for paying all required taxes on any profits that are withdrawn from the business. All profits received from this type of corporation are double taxed.
An S corporation is an example of a pass-through entity because the profits and losses are passed through the business to the owners. These profits aren't subject to double taxation, the way the income of a C corporation is taxed, because the owners only pay taxes on the income at a personal level. The owners do have to report all profits and losses on their personal tax returns and pay required federal and state income tax on the amount reported.
A business that has incorporated in the state of Nevada must also file a federal business tax return (Form 1120) with the IRS, as well as a state tax return with the Department of Revenue. Even if a business isn't required to pay taxes, it should still file at least a document that provides information about the profits and losses.
Nevada Nonprofit Tax Exemptions
Some entities that are non-profit and registered in the state may be exempt from both federal and state income taxes. In order to be exempt from the state income tax rate, a business must be certified as a 501(c) non-profit organization.
Examples of potentially exempt businesses include:
- Recreational organizations that are tax-exempt, such as recreational clubs and social groups. These groups may be able to collect funds, such as memberships dues, exempt from taxes as long as the group's purpose is a non-profit purpose. This type of organization can operate tax-free under § 501(c)(7) of the IRC
- Worker's organizations and labor unions are not taxed on any dues paid or other forms of income, based on the IRC, § 501(c)(4) and § 501(c)(5)
- Scientific and educational institutions are also considered exempt from taxes, including non-profit colleges, schools, and some institutions that conduct research. These institutions are covered under the IRC, § 501(c)(3)
- Charitable organizations are not required to pay any corporate income taxes, including non-religious and religious charities. § 501(c)(3) of the IRC also covers these organizations
- Religious institutions, including mosques, synagogues, and churches are tax-exempt under the IRC, § 501(c)(3) as well
To become tax-exempt in the state of Nevada, a corporation must get a non-profit identification number from the IRS and qualify as a 501(c) organization. The state may also require the corporation to complete additional documents and file them with the Department of Revenue in order to be exempt from corporate taxes on the state level.
Federal Corporate Income Tax Brackets 2018
Corporations operating in the state of Nevada are also required to pay corporate income tax on the federal level. This tax rate also follows a bracket system, including eight tax brackets that are based on the corporation's income level. These tax brackets are different from the brackets that apply to personal income tax in that they are not progressive brackets. The final bracket isn't the highest, which ensures that the burden of corporate taxes is spread more evenly across corporations with all levels of revenue.
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