S Corporations do not pay federal income tax at the corporate level. Instead, the corporation’s income, losses, deductions, and credits are passed through to the shareholders, who report their respective shares on their individual tax returns. The shareholders then pay taxes on their share of the S Corporation’s income at their individual tax rates, which for the 2025 tax year range from 10% to 37% based on their taxable income levels, according to the [IRS Revenue Procedure 2024-40](https://www.irs.gov/pub/irs-drop/rp-24-40.pdf).
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