Estimate your potential federal income tax liability for your business.
This calculator provides an estimate based on common tax structures and assumes standard deductions.
Consult a tax professional for personalized advice.
Navigating business taxes in the United States can be complex, with different rules applying based on the legal structure of your business and the nature of your income. The Internal Revenue Service (IRS) oversees the collection of federal taxes. This calculator provides an estimation of your federal income tax liability based on common business structures.
How the Calculation Works (Simplified)
The core of business taxation involves determining your taxable income and then applying the relevant tax rates. The process generally follows these steps:
Calculate Gross Profit: This is your Gross Revenue minus your Cost of Goods Sold (COGS). COGS includes the direct costs attributable to the production or purchase of the goods sold by your company.
Calculate Net Business Income: This is your Gross Profit minus your Operating Expenses. Operating expenses are the costs associated with running your business that are not directly tied to production, such as rent, utilities, salaries (for employees other than owners, depending on structure), marketing, etc.
Determine Total Taxable Income: This varies significantly by business structure:
Sole Proprietorship / Single-Member LLC: Business income/loss is reported on the owner's personal tax return (Schedule C). The Net Business Income is added to any other personal income (like wages or investment income) to arrive at the total taxable income. Owner's draws or salaries are generally not deductible business expenses for the business itself but affect the owner's personal tax situation.
Partnership / Multi-Member LLC: The partnership itself does not pay income tax. Profits and losses are "passed through" to the partners, who report their share on their individual tax returns. The business reports its income and expenses to determine the total profit or loss to be allocated. Owner's salaries/draws are typically treated as guaranteed payments or distributions.
S-Corporation: Similar to partnerships, S-corps are pass-through entities. Profits and losses are passed through to shareholders' personal tax returns. Shareholders who actively work for the company must receive a "reasonable salary" (subject to payroll taxes), and any remaining profits are distributed as dividends. The salary is a deductible business expense for the S-corp.
C-Corporation: C-corps are separate legal entities and are taxed on their profits at the corporate tax rate. If profits are then distributed to shareholders as dividends, those dividends are taxed again at the shareholder level (double taxation).
Apply Tax Rates:
Individuals (Sole Proprietorship, Partnership, S-Corp Shareholders): Taxable income is subject to progressive individual income tax rates, which range from 10% to 37% (as of recent tax years).
C-Corporations: Currently subject to a flat corporate tax rate of 21%.
Key Inputs Explained
Gross Revenue: The total income generated from sales of goods or services before any deductions.
Cost of Goods Sold (COGS): Direct costs of producing goods or services sold.
Operating Expenses: Costs incurred to run the business day-to-day, not directly tied to production.
Owner's Salary/Draws: Compensation paid to the owner(s). Deductibility and tax treatment depend heavily on business structure. For C-corps and S-corps, a reasonable salary is a deductible expense. For sole proprietorships, it's not a business expense but a distribution of profit.
Other Taxable Income: Income from sources outside the business that should be included in the individual's total taxable income.
Important Considerations
This calculator provides a simplified estimate. It does not account for:
State and local taxes.
Self-employment taxes (Social Security and Medicare taxes) for sole proprietors, partners, and some LLC members.
Payroll taxes for employee wages and shareholder salaries.
Tax credits, deductions, and specific tax laws that may apply to your situation.
Depreciation or amortization.
Capital gains or losses.
Alternative Minimum Tax (AMT).
Disclaimer: Always consult with a qualified tax professional or CPA for advice tailored to your specific business circumstances. Tax laws are subject to change.
var standardRates = {
individual: [
{ limit: 11000, rate: 0.10 },
{ limit: 44725, rate: 0.12 },
{ limit: 95375, rate: 0.22 },
{ limit: 182100, rate: 0.24 },
{ limit: 231250, rate: 0.32 },
{ limit: 578125, rate: 0.35 },
{ limit: Infinity, rate: 0.37 }
],
cCorpRate: 0.21
};
function updateBusinessType() {
var businessType = document.getElementById("businessType").value;
var ownerSalaryDiv = document.getElementById("ownerSalaryDiv");
if (businessType === "soleProprietorship" || businessType === "partnership") {
ownerSalaryDiv.style.display = "none"; // Owner compensation handled differently, not a deductible expense in this simplified model.
} else if (businessType === "sCorp") {
ownerSalaryDiv.style.display = "flex"; // Owner salary is a deductible expense.
} else if (businessType === "cCorp") {
ownerSalaryDiv.style.display = "flex"; // Owner salary (as an employee) is a deductible expense.
} else {
ownerSalaryDiv.style.display = "none";
}
}
function calculateTax() {
var businessType = document.getElementById("businessType").value;
var grossRevenue = parseFloat(document.getElementById("grossRevenue").value) || 0;
var costOfGoodsSold = parseFloat(document.getElementById("costOfGoodsSold").value) || 0;
var operatingExpenses = parseFloat(document.getElementById("operatingExpenses").value) || 0;
var ownerSalary = parseFloat(document.getElementById("ownerSalary").value) || 0;
var otherTaxableIncome = parseFloat(document.getElementById("taxableIncome").value) || 0;
var netBusinessIncome = grossRevenue – costOfGoodsSold – operatingExpenses;
var totalTaxableIncome = 0;
var estimatedTax = 0;
var taxRateApplied = 0;
if (businessType === "soleProprietorship" || businessType === "partnership") {
// For sole prop/partnership, net business income flows to personal return.
// We'll add owner's draws/salary back in as it's not a deductible expense here,
// and it represents funds taken by the owner which are essentially their personal income.
// In reality, this is more nuanced (distributions vs. salary for partners), but for simplification:
totalTaxableIncome = netBusinessIncome + otherTaxableIncome;
// This assumes the owner's "salary/draw" from the business is their personal income beyond the business's net profit.
// A more accurate calculation would require knowing if ownerSalary is included in Operating Expenses or if it's a draw.
// For simplicity, we assume ownerSalary is not in OpEx and adds to the personal income base.
// Calculate individual income tax using progressive rates
var remainingIncome = totalTaxableIncome;
for (var i = 0; i < standardRates.individual.length; i++) {
var bracket = standardRates.individual[i];
var taxableInBracket = 0;
if (remainingIncome 0) {
estimatedTax += taxableInBracket * bracket.rate;
remainingIncome -= taxableInBracket;
}
}
taxRateApplied = estimatedTax / totalTaxableIncome * 100 || 0; // Approximate effective rate
} else if (businessType === "sCorp") {
// S-Corp: Owner's salary is a deductible expense. Remaining profit is pass-through.
var sCorpProfit = netBusinessIncome – ownerSalary;
// Owner's salary is subject to payroll taxes (not calculated here) and reported as wages.
// Pass-through profit + other taxable income forms the basis for individual tax.
totalTaxableIncome = sCorpProfit + otherTaxableIncome;
// Calculate individual income tax using progressive rates
var remainingIncome = totalTaxableIncome;
for (var i = 0; i < standardRates.individual.length; i++) {
var bracket = standardRates.individual[i];
var taxableInBracket = 0;
if (remainingIncome 0) {
estimatedTax += taxableInBracket * bracket.rate;
remainingIncome -= taxableInBracket;
}
}
taxRateApplied = estimatedTax / totalTaxableIncome * 100 || 0; // Approximate effective rate
} else if (businessType === "cCorp") {
// C-Corp: Taxed at the corporate rate. Owner salary is deductible.
var cCorpTaxableIncome = netBusinessIncome – ownerSalary;
if (cCorpTaxableIncome < 0) cCorpTaxableIncome = 0; // Can't have negative corporate tax liability
estimatedTax = cCorpTaxableIncome * standardRates.cCorpRate;
taxRateApplied = standardRates.cCorpRate * 100; // Flat rate
// Note: This doesn't include potential dividend tax for the owner.
}
// Basic validation: Ensure no negative income leads to negative tax
if (isNaN(estimatedTax) || estimatedTax < 0) {
estimatedTax = 0;
}
if (isNaN(totalTaxableIncome) || totalTaxableIncome 0) {
resultText += " (Approx. Effective Rate: " + taxRateApplied.toFixed(2) + "%)";
} else {
resultText += " (No Taxable Income)";
}
document.getElementById("result").innerHTML = "" + resultText + "";
}
// Initialize visibility based on default selection
document.addEventListener('DOMContentLoaded', updateBusinessType);