tax
Income Tax
Tax on personal income. For sole proprietors and pass-through entities, the main tax on business profit.
Definition
Income tax is the tax owed by individuals on personal earnings, including business profits passed through from sole proprietorships, single-member LLCs, S-Corps, and partnerships. In the US, federal income tax rates range from 10-37% depending on bracket, plus state income tax in most states. For owners of pass-through businesses, the business profit flows to their personal return. Tax planning - choice of entity, retirement contributions, timing of deductible expenses - can materially change the effective rate.
In your business
- →Pay quarterly estimated taxes if you're self-employed - the IRS penalizes underpayment
- →Maximize legitimate deductions and retirement contributions before filing
- →Work with a CPA who specializes in business owners - generalist tax prep misses opportunities