US Business Tax Calculator (2026)
Small business taxation in the United States depends fundamentally on legal entity structure. Pass-through entities (Sole Proprietorships, Single-Member LLCs, Partnerships, and S-Corporations) pass business profits directly to owners' individual tax returns, where they may qualify for the 20% Qualified Business Income (QBI) deduction under Section 199A but are subject to self-employment tax or reasonable compensation salary rules. In contrast, C-Corporations face a flat 21% federal corporate income tax at the entity level, with shareholders subject to dividend taxation. This calculator determines your exact tax burden across federal income tax, self-employment/FICA payroll taxes, state business taxes, and net take-home cash flow.
Business Tax Parameters (2026)
LLC vs S-Corp vs C-Corp · QBI 20% Deduction · State Corporate Rates
Calculation Breakdown
Total business receipts and sales
Ordinary and necessary business expenses under IRC § 162
Individual pass-through tax tier
Mandatory FICA equivalent on 92.35% of sole prop net earnings
Statutory 20% federal tax deduction for eligible pass-through businesses
Total profit remaining after all federal and state business taxes
•Tax calculation modeled under 2026 Internal Revenue Code and Texas tax schedules.
•Consult a licensed CPA or tax attorney for formal entity structuring and year-end planning.
2026 Corporate & Pass-Through Tax Codes
C-Corporations pay a flat 21% federal income tax under the Tax Cuts and Jobs Act (TCJA, IRC § 11). Pass-through entities (LLCs, S-Corps, Sole Proprietorships) pass taxable profit through to the owners' individual Form 1040 tax returns, where eligible businesses enjoy the 20% Section 199A Qualified Business Income (QBI) deduction.
How Your US Business Tax Was Calculated
Statutory standards under 2026 Internal Revenue Code (IRC § 11, § 199A, § 1401) and Texas corporate tax codes.
Calculate Net Taxable Business Profit
$180,000.00Under IRC § 162, businesses deduct all ordinary and necessary expenses incurred in carrying on a trade or business from gross revenue to determine taxable income.
Entity Structure Tax Treatment
$29,441.88Sole proprietorships and single-member LLCs pass all net profits directly to the owner's personal Form 1040, where the full amount is subject to 15.3% Self-Employment Tax.
State Corporate & Franchise Tax Assessment
$0.00Texas imposes 0% personal and corporate income tax, relying on gross receipts or margin taxes instead.
Total Business Tax Liability & Effective Rate
$54,875.07Combined tax burden represents an effective tax rate of 30.5% on net business profit, leaving $125,124.93 in retained earnings.
How this calculator works
How it works
- 01Entity Selection: Select between Sole Proprietorship / Disregarded LLC, S-Corporation, C-Corporation, or Multi-Member Partnership.
- 02Net Business Profit: Computes net taxable profit as gross revenues minus ordinary business operating expenses, cost of goods sold, and depreciation.
- 03S-Corp Wage vs Distribution Split: For S-Corporations, splits net profit into W-2 reasonable compensation (subject to FICA payroll tax) and shareholder distributions (exempt from self-employment tax).
- 04Section 199A QBI Deduction: Applies the 20% Qualified Business Income deduction on eligible pass-through profits, subject to taxable income phase-in thresholds.
- 05Self-Employment & FICA Taxes: Computes 15.3% self-employment tax (12.4% Social Security up to $184,500 cap + 2.9% Medicare) for sole proprietors/LLCs, or matching FICA for S-Corps.
- 06Corporate vs Individual Federal Tax: Applies the flat 21% IRC §11 corporate rate for C-Corps or progressive individual brackets (10% to 37%) for pass-through owners.
- 07State Tax & Franchise Fees: Incorporates state corporate or individual income tax rates and mandatory state annual franchise fees (e.g. California $800 minimum).
Tax rules that apply
- •Pass-Through Taxation vs C-Corp: Pass-through entities avoid double taxation. Business profits are taxed only once at the owner's personal tax rate. C-Corporations are taxed at a flat 21% entity level, and distributions to shareholders are taxed a second time as qualified dividends (0%, 15%, or 20%).
- •The S-Corporation FICA Loophole: By electing Subchapter S status, business owners can pay themselves a 'reasonable salary' subject to payroll taxes, while taking remaining net profits as distributions free from the 15.3% self-employment tax. However, the IRS strictly audits unreasonable salaries that are artificially low.
- •Section 199A Qualified Business Income (QBI) Deduction: Eligible pass-through business owners can deduct up to 20% of their net qualified business income from their federal taxable base before calculating income tax.
- •Self-Employment Tax Deduction: Sole proprietors and LLC members can deduct half of their self-employment tax (the 7.65% employer-equivalent share) as an above-the-line deduction on Form 1040 Schedule 1.
Current Tax Rates
| Tax / Deduction | Rate | Notes |
|---|---|---|
| C-Corp Federal Tax Rate | 21.0% | Flat statutory corporate income tax (IRC §11) |
| Social Security Cap (2026) | $184,500 | 6.2% employer + 6.2% employee (12.4% total) |
| Medicare Tax Rate | 2.90% | Uncapped (1.45% employer + 1.45% employee) |
| Section 199A QBI Deduction | Up to 20% | Deduction on pass-through business net profits |
| Self-Employment Tax Rate | 15.3% | Applies to 92.35% of net sole prop/LLC profit |
What this calculator assumes
- Reflects 2026 IRS federal tax schedules, FICA caps ($184,500), and standard corporate tax laws.
- Assumes single filer standard deduction for pass-through personal income calculations unless itemized.
- S-Corporation modeling assumes owner-operator draws a defensible reasonable compensation under IRS guidelines.
- Does not model local municipal gross receipts taxes (e.g. SF gross receipts or NYC unincorporated business tax) unless entered as expense.
Where our numbers come from
These calculators are based on official government tax rates and rules. We link directly to the source so you can verify everything yourself.
IRS Form 1120 & Instructions — U.S. Corporation Income Tax Return (IRC §11)
Internal Revenue Service — U.S. Department of the Treasury
IRS Publication 15 (Circular E) — Employer's Tax Guide (FICA & FUTA)
Internal Revenue Service — U.S. Department of the Treasury
California FTB — Corporation and LLC Filing Requirements (Form 100 & 568)
California Franchise Tax Board
Texas Comptroller — Franchise Tax Overview & Thresholds (Tax Code Chapter 171)
Texas Comptroller of Public Accounts
Frequently Asked Questions
How is an LLC taxed compared to an S-Corporation or C-Corporation?
By default, a Single-Member LLC is a 'disregarded entity' taxed as a Sole Proprietorship, where 100% of net profits are subject to both ordinary income tax and 15.3% self-employment tax. A C-Corporation is a separate taxable entity subject to a flat 21% federal corporate tax on net profits, plus tax on dividends when distributed. An LLC can elect to be taxed as an S-Corporation via IRS Form 2553: profits are split into a W-2 salary (subject to payroll taxes) and shareholder distributions (which bypass the 15.3% FICA payroll tax), often saving thousands of dollars annually once net profits exceed $60,000.
What is the 20% Qualified Business Income (QBI) deduction under Section 199A?
Enacted under the Tax Cuts and Jobs Act (TCJA), Section 199A allows eligible owners of pass-through entities (Sole Proprietors, LLCs, Partnerships, and S-Corps) to deduct up to 20% of their qualified business earnings from their taxable income. For 2026, the full deduction applies up to indexed taxable income limits. For Specified Service Trades or Businesses (SSTBs) like law, medicine, consulting, and athletics, the deduction phases out above these thresholds.
What is a 'reasonable salary' for an S-Corporation shareholder?
Under IRS rules, shareholder-employees of an S-Corporation must receive 'reasonable compensation' for the services they provide to the business before any non-wage distributions can be taken. The IRS evaluates factors like duties performed, hours worked, industry wage standards, and business revenue. Setting your salary unreasonably low (e.g., $15,000 salary on $150,000 profit) is a top audit trigger and can result in reclassification of distributions as wages, back taxes, and hefty penalties.
Do small businesses pay state income taxes?
It depends on your state and entity type. Nine states (AK, FL, NV, NH, SD, TN, TX, WA, WY) have no broad personal income tax, meaning pass-through owners pay zero state individual income tax. However, states like California levy personal income taxes up to 13.3% on pass-through earnings plus a mandatory $800 minimum franchise tax and LLC gross receipts fees. C-Corporations pay state corporate income taxes ranging from 2.5% (North Carolina) to 9.8% (Minnesota) or 11.5% (New Jersey).
Can I deduct business startup costs on my 2026 tax return?
Under IRC §195, you can immediately deduct up to $5,000 in qualifying business startup costs and up to $5,000 in organizational expenses in the first year your active trade or business begins, provided your total startup expenses do not exceed $50,000. Any remaining costs above $5,000 must be amortized ratably over 180 months (15 years) starting with the month your business becomes operational.
How do estimated quarterly tax payments work for business owners?
Because business profits and contractor payments do not have automatic paycheck withholding, small business owners must remit quarterly estimated taxes using IRS Form 1040-ES and state vouchers. Due dates are generally April 15, June 15, September 15, and January 15. To avoid underpayment penalties, you must satisfy safe harbor rules: pay at least 90% of your current-year tax liability or 100% of your prior-year tax (110% if prior-year AGI was over $150,000).
