Professional services
Small Business Tax Calculator
Estimates small business tax, where the entity type decides almost everything.
Result
Not tax advice. Entity choice, reasonable compensation, pass-through deductions and state treatment interact in ways that depend entirely on your circumstances, and the rules change annually. This estimates a set-aside; the decision belongs with an accountant. The pass-through deduction has income thresholds and excludes several service businesses above them, so claiming the full 20% is frequently wrong. This also applies a flat marginal rate rather than progressive brackets, which overstates the tax.
Get a Free Business AuditHow the calculation works
Net profit after expenses carries tax that depends on the structure. A sole proprietorship or partnership passes income through to owners who pay income tax plus self-employment tax. An S corporation splits it between wages and distributions. A C corporation pays tax itself and again on dividends. This estimates the pass-through case, which is the most common for small businesses, as a planning figure rather than a return.
What moves the number
- Entity type, which changes the calculation fundamentally.
- Net profit after all legitimate business expenses.
- Owner's other income and filing status.
- State and local tax, which this does not model.
Where this one goes wrong
The most common error is estimating tax on revenue rather than on profit, which produces a terrifying and wrong number. The second is forgetting self-employment tax, which for a pass-through owner is a substantial amount on top of income tax. The third is treating money drawn from the business as the taxable figure when the taxable figure is the profit whether or not it was drawn. Rates and thresholds change annually and this is for planning.
Before you quote
- Calculate on net profit, not revenue, and not on owner draws.
- Include self-employment tax for pass-through structures.
- Confirm current rates and your state's treatment.
Where the rules come from
Questions
About this calculator
Is my tax based on revenue or profit?
Profit, after legitimate business expenses. Estimating from revenue produces a frightening and wrong figure. It is also not based on what you drew from the business, since pass-through profit is taxable whether or not it was taken out.
Which entity type pays the least tax?
It depends on profit level, how much the owner needs to draw, and state treatment, which is why there is no general answer. An S corporation election can reduce payroll tax above certain profit levels while adding administrative cost, and the crossover is specific to your numbers.
What is commonly missed in small business tax planning?
Self-employment tax, which for a pass-through owner is substantial and sits on top of income tax, and quarterly estimated payments, which are required rather than optional above a threshold and carry a penalty when underpaid.
The formula
net profit, then self-employment tax, then income tax on profit less half the SE tax, the standard deduction and any pass-through deduction
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How to use this calculator
- Business revenue ($). Enter your own figure; the page starts at $240,000.
- Deductible business expenses ($). Enter your own figure; the page starts at $96,000.
- Self-employment tax rate (%). Enter your own figure; the page starts at 15.3%.
- Federal marginal rate (%). Enter your own figure; the page starts at 22%.
- State rate (%). Enter your own figure; the page starts at 5%.
- Standard or itemised deduction ($). Enter your own figure; the page starts at $14,600.
The result updates as you type, so you can try a figure, see what it does to estimated total tax, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Business revenue | $240,000 |
| Deductible business expenses | $96,000 |
| Self-employment tax rate | 15.3% |
| Federal marginal rate | 22% |
| State rate | 5% |
| Standard or itemised deduction | $14,600 |
| Pass-through deduction claimed | 20% |
What comes out
| Result | Value |
|---|---|
| Estimated total tax main result | $44,762 |
| Net business profit | $144,000 |
| Self-employment tax | $20,347 |
| Income tax | $24,415 |
| Left after tax | $99,238 |
| Effective rate on profit | 31.08% |
On $144,000 of net profit the tax is about $44,762, made up of $20,347 self-employment tax and $24,415 income tax. That leaves $99,238, an effective rate of 31.08%.
How sensitive the answer is
Holding everything else steady and changing only business revenue, this is what happens to estimated total tax. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Business revenue ($) | Estimated total tax |
|---|---|
| $120,000 | $4,175 |
| $180,000 | $24,469 |
| $240,000 example above | $44,762 |
| $360,000 | $85,348 |
| $480,000 | $125,935 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Business revenue ($)
- A money amount, starting at $240,000.
- Deductible business expenses ($)
- A money amount, starting at $96,000.
- Self-employment tax rate (%)
- A percentage, between 0 and 20, starting at 15.3%.
- Federal marginal rate (%)
- A percentage, between 0 and 50, starting at 22%.
- State rate (%)
- A percentage, between 0 and 15, starting at 5%.
- Standard or itemised deduction ($)
- A money amount, starting at $14,600.
- Pass-through deduction claimed (%)
- Where it applies. Eligibility is restricted.
What the results tell you
| Result | What it is |
|---|---|
| Estimated total tax | The headline result. A money figure. |
| Net business profit | A money figure. |
| Self-employment tax | A money figure. |
| Income tax | A money figure. |
| Left after tax | A money figure. |
| Effective rate on profit | A percentage. |
Keep going
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