Business Income Tax Calculator: Tax on Business Profit
Work out the income tax owed on business profit, and what's left after tax — for C corporations, pass-through entities, or any business structure once you have the effective rate.
Adjust the inputs and select Calculate for a full breakdown.
Compare Common Scenarios
How the numbers shift across typical situations for this calculator:
| Scenario | Business income tax | After-tax profit |
|---|---|---|
| 21% of $500k (C-corp federal) | 105,000 | 395,000 |
| 27% of $500k (with state) | 135,000 | 365,000 |
| 32% of $200k (pass-through) | 64,000 | 136,000 |
| 21% of $5M (large C-corp) | 1,050,000 | 3,950,000 |
How This Calculator Works
Enter the taxable profit (after all deductible expenses) and the applicable tax rate. The calculator multiplies the two to give the tax owed and shows the after-tax profit. C corporations use the flat 21% US federal rate; pass-throughs use the owner's individual rate plus any state tax.
The Formula
Percentage of an Amount
Amount is the base value, Percentage is the rate applied to it
Worked Example
A C corporation with $500,000 of taxable profit at the 21% federal rate owes $105,000, leaving $395,000 after federal tax. Add state corporate tax (say 6%) and the effective rate becomes 27%, raising the bill to $135,000. Pass-through entities (LLC, S corp) instead pass the $500,000 to owners taxed at individual rates, often higher but eligible for the 20% QBI deduction.
Key Insight
Business structure dominates the tax outcome. C corporations face a flat 21% federal rate but suffer double taxation (corporate tax + dividend tax when profits are distributed). Pass-throughs (LLC, S corp, sole proprietor) avoid the entity-level tax — profit flows to owners taxed once at individual rates, with a potential 20% Qualified Business Income deduction. The right structure depends on profit level, distribution plans, and state — a CPA consultation typically pays for itself many times over at the $500k profit level.
Entity structure tax comparison
U.S. business entity tax structures.
(1) C-CORPORATION — 21% federal corporate tax. Plus shareholder dividends taxed at 15-20% LTCG. Combined effective rate ~37-43% (with NIIT). 'Double taxation' but separates business from personal taxes.
(2) S-CORPORATION — pass-through to shareholders' individual returns. No entity-level federal tax. Shareholders pay individual rates (10-37%) on share of business income. Can save 15.3% self-employment tax on owner-employee wages structure.
(3) PARTNERSHIP/LLC — pass-through to partners/members. Self-employment tax 15.3% on partner's share of partnership net income (active partners). LLCs can elect S-corp tax treatment.
(4) SOLE PROPRIETORSHIP — pass-through to owner's Schedule C. Self-employment tax 15.3% on net profit. Simple but full SE tax exposure.
Optimal entity. Depends on income level, growth plans, distribution needs, state of incorporation. For most small businesses with $50K-$300K profit, S-corp election (via LLC or S-corp) often produces best total tax outcome — owner pays reasonable salary subject to FICA, takes additional distributions free of SE tax.
QBI deduction (§199A) — the pass-through advantage
TCJA created Qualified Business Income (QBI) deduction allowing pass-through business owners to deduct up to 20% of business income. Available for: S-corps, partnerships, LLCs, sole proprietorships.
Limits and phase-outs. 2024 thresholds: single $191,950; MFJ $383,900. Below threshold: 20% deduction without limits. Above threshold: deduction limited based on W-2 wages paid by business AND/OR unadjusted basis of qualified property.
Specified Service Trade or Business (SSTB). Health, law, accounting, consulting, financial services, investment management, athletes, entertainers. Above income threshold, SSTB QBI deduction phases out entirely. Non-SSTB businesses (retail, manufacturing, real estate) retain QBI deduction with wage/property limits.
Strategic implications. Pass-through structure with QBI deduction effectively reduces federal tax on business income by ~7 percentage points (20% of 35% bracket). For SSTB businesses approaching income threshold, planning to stay below threshold or use entity strategies preserving deduction valuable. QBI deduction sunsets 2026 absent congressional renewal.
Business income tax comparison — illustrative ($200K profit)
Reference comparative federal tax burden by entity structure on $200K business profit.
| Entity | Entity tax | Owner-level tax | Self-employment tax | Total effective rate |
|---|---|---|---|---|
| C-corp + dividend | $42K (21%) | $15-30K (15-20% LTCG) | $0 | 29-36% |
| S-corp (salary + distribution) | $0 | $28-40K (individual) | $7-11K (on salary only) | ~24-28% |
| LLC pass-through | $0 | $28-40K (incl QBI deduction) | $28K (full) | ~28-32% |
| Sole proprietorship | $0 | $28-40K (incl QBI deduction) | $28K (full) | ~28-32% |
S-corp election typically produces lowest total tax for $100K-$500K business profit range due to SE tax savings on distributions beyond owner's reasonable salary. C-corp typically only advantageous for high-growth businesses retaining substantial earnings (TCJA 21% rate) or businesses with sophisticated tax planning. State tax adds 0-13% depending on state.
Frequently Asked Questions
How is business income tax calculated?
Multiply taxable profit by the applicable tax rate. A 21% rate on $500,000 of C-corp profit is $105,000 in federal tax.
What's the US corporate tax rate?
C corporations pay a flat 21% federal rate (since the 2017 TCJA). State corporate tax adds 0% (no-corporate-tax states like Texas, Nevada, Wyoming) to roughly 12% (top-rate states). Effective combined rates typically run 21% to 30%.
How are pass-through entities taxed?
LLCs, S corporations, partnerships, and sole proprietors pass profit to owners, taxed at individual rates (10% to 37% federal) plus self-employment tax in some cases. The 20% Qualified Business Income (QBI) deduction can reduce the effective rate substantially for qualifying businesses.
C corp or pass-through?
Pass-through avoids double taxation and suits most small businesses, especially those distributing profits to owners. C corp can win when retaining profits for reinvestment (21% flat beats high individual rates) or seeking outside investment. The decision is structure-and-state specific — consult a CPA.
What about the QBI deduction?
Qualified Business Income deduction lets eligible pass-through owners deduct up to 20% of qualified business income, lowering the effective rate. Subject to income thresholds and business-type limits (specified service businesses phase out at higher incomes). It's a major reason pass-throughs often beat C corps for service businesses.
When is this calculator unreliable?
When ignoring entity structure choice (different structures produce very different total tax outcomes — S-corp typically saves SE tax for owner-employees). Also unreliable when not accounting for QBI deduction limits (above income threshold, complex limitations apply). For business with $100K+ profit, consult tax CPA for entity structure optimization — typical fee easily recovered through tax savings.
References & Authoritative Sources
- Internal Revenue Service (IRS) — Business Tax Information · consulted June 1, 2026 · Federal regulator on business taxation
- Tax Foundation — Business Tax Research · consulted June 1, 2026 · Authoritative business tax policy research
- U.S. Small Business Administration (SBA) — Business Tax Resources · consulted June 1, 2026 · SBA guidance for small business tax
Related Calculators
Data Sources & Benchmarks
This calculator draws on 1 independent, dated source.
Methodology & Review
Business income tax depends on entity structure. C-corporation: 21% federal flat rate (post-TCJA). Pass-through entities (S-corp, partnership, LLC, sole proprietorship): income taxed at owner's individual rate plus possible 20% QBI deduction (TCJA §199A). The calculator returns estimated tax. State business taxes additional. Self-employment tax 15.3% applies to sole proprietorships and partnerships (some LLCs). RELIABILITY: Reliable for direct calculation given entity structure. Less reliable for actual planning because (a) pass-through entities subject to AGI limits and phase-outs on QBI deduction; (b) state tax rates vary substantially; (c) depreciation, deductions, credits substantially reduce taxable income; (d) entity choice optimization is complex.
Updated