Running a small business means you are the employee and the payroll department at the same time. The IRS collects self-employment tax for Social Security and Medicare, then layers progressive federal income tax on top of your profit, and your state adds its own bite on top of that. This small business tax calculator stacks all three layers on your annual net profit — and, unlike a stripped-down self-employment tool, it also applies the 20% Qualified Business Income (QBI) deduction under Section 199A, which is the single biggest tax break most LLC and sole-prop owners are missing.
Enter your net profit, choose your filing status, and add your state rate. Every figure updates instantly. The result card splits the bill into self-employment tax, the QBI deduction, federal income tax, and state tax, then shows your total burden and the effective percentage of profit you actually keep — the number that should drive your quarterly estimated-tax savings.
How to Use
- Enter your Annual Net Profit — Schedule C line 31 profit, or your share of a partnership K-1, after legitimate business expenses. Do not subtract owner draws; those are not a deductible business expense.
- Set your Filing Status. This picks the 2024 federal brackets and the standard deduction ($14,600 single or $29,200 married filing jointly).
- Add your State Income Tax Rate if your state charges one. For Texas, Florida, Washington, Nevada, Wyoming, South Dakota, and Alaska there is no state income tax, so leave it at 0.
- Read the result card. Self-Employment Tax is the Social Security and Medicare levy, QBI Deduction is the 20% Section 199A write-off, Federal Income Tax is the progressive bracket tax, and Total Small-Business Tax is the number that should drive your Form 1040-ES savings.
- Use the Effective Tax Rate to budget. If it lands near 25–30% on $100k–$200k of profit, setting aside that percentage of every customer payment is a safe default.
How the Math Works
A sole proprietor or a single-member LLC is a "disregarded entity": the business itself pays no federal income tax. Instead, profit flows straight onto your personal 1040, and the IRS applies two federal taxes:
- Self-employment tax. You pay both the employee and employer side of FICA: 12.4% for Social Security plus 2.9% for Medicare, or 15.3% total. This calculator uses the simplified rate directly on net profit, which is close enough for quarterly planning and avoids the 92.35% reduction and the wage-base cap that a full tax return handles.
- QBI deduction (Section 199A). This is the 2017 tax-cut provision that lets most pass-through owners deduct 20% of their qualified business income before federal income tax. On $120,000 of profit that is a $24,000 deduction — it does not reduce self-employment tax, but it lowers the income-tax base substantially.
- Federal income tax. Taxable income equals net profit minus the QBI deduction minus your standard deduction. Progressive 2024 brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) are applied band by band.
On a $120,000 single-member LLC profit: self-employment tax is $18,360, the QBI deduction is $24,000, the standard deduction is $14,600, taxable income is $81,400, federal income tax is about $12,961, and the total federal bill lands near $31,321 — an effective rate of about 26.1%. That is the number most new LLC owners miss: they budget 22% and are shocked at quarter-end.
Examples
Example 1 — A freelancer at $120,000. A single web designer runs a single-member LLC. Net profit is $120,000, filing single, no state tax. Self-employment tax is $18,360; QBI deduction is $24,000; federal income tax after the QBI and standard deduction is $12,961. Total tax is $31,321, an effective rate of 26.1%. Setting aside 27–28% of each invoice covers the bill without surprises.
Example 2 — Married couple at $200,000 in a 5% state. A husband-and-wife LLC nets $200,000 and files jointly. Self-employment tax is $30,600; QBI deduction is $40,000; the married standard deduction is $29,200; taxable income is $130,800; federal income tax is about $18,882; state tax at 5% adds $6,540. Total tax is $56,022, an effective rate of about 28.0%. Notice how joint filing and the larger standard deduction soften the federal bite, while the state line still adds up.
Example 3 — A seven-figure business at $1,500,000. At this level the marginal rates climb into the 32% and 35% bands. Self-employment tax is roughly $229,500, QBI deduction is $300,000, federal income tax about $396,786, and the combined federal burden lands near $626,286 — an effective rate above 41%. At this level the simplified calculator ignores the Social Security wage-base cap, QBI wage/income limits, and surtaxes, so a CPA and an S-election analysis are strongly recommended.
FAQ
How much tax does a small business pay?
By default a sole proprietorship or single-member LLC pays no entity-level federal income tax. The owner pays self-employment tax (15.3% of net profit) plus federal income tax through progressive brackets after the 20% QBI deduction and standard deduction, then state tax. On $120,000 of profit, a single owner pays roughly $31,000 in total tax — about a 26% effective rate.
What is the QBI deduction and who qualifies?
The Qualified Business Income (QBI) deduction under Section 199A lets most pass-through owners (sole props, LLCs, partnerships, S-corps) deduct 20% of their business income before federal income tax. It does not reduce self-employment tax. At lower income levels it is nearly automatic; above roughly $191,950 single / $383,900 married in 2024, wage and property limits start to phase it out for specified-service businesses.
Is an LLC taxed differently than a sole proprietorship?
Taxed the same by default. A single-member LLC is a "disregarded entity" and files the same Schedule C as a sole proprietor, with the same self-employment tax and QBI deduction. The LLC gives you liability protection, not a different tax bill. The difference only appears if you elect S-corp or C-corp status.
How much should I set aside for small-business taxes?
A safe rule of thumb is 25–30% of net profit for federal tax in the $100k–$200k range, plus your state rate. Use the effective-rate figure from this calculator as your savings rate, and pay quarterly estimated taxes on Form 1040-ES to avoid underpayment penalties.
Should I elect S-corp status to save tax?
Sometimes. An S-corp lets you split profit into a "reasonable salary" (subject to SE/FICA tax) and distributions (not subject to SE tax). Once net profit comfortably exceeds $60,000–$80,000, the payroll and accounting cost can be justified by the SE-tax savings. This calculator models the default sole-prop / LLC; run S-election numbers with a CPA before committing.
Does the standard deduction apply to small-business owners?
Yes. Because a sole prop or LLC is pass-through, your business profit is reduced by the same standard deduction available to all filers ($14,600 single, $29,200 married in 2024), on top of the 20% QBI deduction. That is why taxable income is lower than raw net profit.
Are owner draws or distributions taxable to the business?
No. Owner draws are not a deductible business expense and are not taxed separately — they are withdrawals of profit that was already taxed when the business earned it. Do not subtract draws from net profit when using this calculator.
Disclaimer
This small business tax calculator is provided for informational purposes only and does not constitute tax, legal, or accounting advice. It uses simplified 2024 federal brackets, a flat state rate, a simplified 15.3% self-employment rate, and a flat 20% QBI deduction, and omits the Social Security wage-base cap, QBI wage/income phase-outs, local taxes, and itemized deductions. Actual liability depends on your filing details, deductions, and state rules. Always confirm your estimate with a qualified CPA or enrolled agent before filing or making estimated tax payments.