To get ready for this year’s upcoming tax deadline—and prepare for your 2024 quarterly payments—it’s important to know which tax bracket your business falls into. Understanding the tax rules and rates that apply to your business can help you estimate your total tax bill and set aside enough funds for your quarterly payments.
Keep reading for a complete breakdown of 2023 and 2024 small business tax brackets, factors that affect your tax rate, and information on how and when to file.
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How are small businesses taxed?
As a small business, you’re taxed according to your business structure. How and what you pay depends on whether you’re registered as a C corporation, S corporation, sole proprietorship, limited liability company (LLC), or partnership. Depending on your business structure, you’ll fall into one of two categories: a pass-through entity or a non pass-through entity.
Pass-through entities
Pass-through entities include sole proprietorships, S corps, LLCs, and partnerships. In a pass-through entity, your business’s income gets passed straight to you as the business owner. As a result, you bypass paying any corporate income tax and instead pay personal income tax on your business’s income.
Exactly how much you pay depends on a few different factors, including:
- Your business’s income
- How much you earn from other jobs or income streams
- Your individual filing status (i.e. single or married)
- Your tax deductions and credits
Some pass-through entities—like single-member LLCs—are also considered disregarded entities. A disregarded entity is a business that has a single owner, isn’t a corporation, and is considered separate from the owner for personal liability reasons—but not for federal tax purposes. The Internal Revenue Service (IRS) disregards the company as being separate from its owner, which means the business owner reports their business’s income and expenses on their own personal tax return.
Non pass-through entities
Non pass-through entities include C corps and LLCs electing to be taxed as corporations. If you own a C corp, you’ll pay corporate taxes on your business’s income first. Currently, C corps pay a flat rate of 21% per the Tax Cuts and Jobs Act of 2017.
Your corporation could then pay individual shareholders dividends (shares of the company’s profit), and those individual shareholders have to pay personal income taxes on the dividends they receive. This is why C corp business owners are subject to what’s called “double taxation”; they’re taxed once at the corporate level then again at the personal level.
What else affects your tax rate?
In addition to your business’s income, your personal income, and your individual filing status, there are two other main factors that affect how much your business pays in taxes: tax credits and tax deductions.
Tax credits
True to their name, tax credits give you a credit toward your taxes, effectively reducing the amount of taxes you owe. You can take advantage of both individual tax credits and business tax credits, which are designed to incentivize you to make certain decisions with your operations or investments.
Common business tax credits include:
- General Business Credit
- Work Opportunity Tax Credit
- Empowerment Zone Employment Credit
- Employee Retention Credit
- Credit For Small Employer Health Insurance Premiums
- Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips
Individual tax credits include:
- Family and dependent credits, like the Child Tax Credit or Credit for the Elderly
- Income and savings credits, like the Foreign Tax Credit or Retirement Savings Contributions Credit
- Homeowner credits, like the Residential Energy Efficient Property Credit
- Healthcare credits, like the Health Coverage Tax Credit
- Education credits, like the American Opportunity Credit and Lifetime Learning Credit
Tax deductions
Small business tax deductions are expenses you can deduct from your total taxable income, effectively lowering your total tax bill. The IRS defines business tax deductions as expenses that are “both ordinary and necessary” to your business.
Common deductions for businesses include:
- Advertising and marketing costs
- Business insurance
- Contract labor
- Depreciation
- Home office
- Legal fees
- Rent
- Salaries
- Phone and internet expenses
- Travel expenses
You’ll also want to check if you qualify for the Qualified Business Income (QBI) deduction, which allows business owners to deduct 20% of their earnings from a “qualified trade or business.” This can be a tricky one, so check out our QBI primer here.
2023 tax brackets
If you’re a sole proprietorship, LLC, partnership, or S corp, here are the applicable individual income tax rates for 2023:
| Tax Rate | Single | Married Filing Jointly |
| 10% | $11,000 and under | $22,000 and under |
| 12% | Over $11,000 | Over $22,000 |
| 22% | Over $44,725 | Over $89,450 |
| 24% | Over $95,375 | Over $190,750 |
| 32% | Over $182,100 | Over $364,200 |
| 35% | Over $231,250 | Over $462,500 |
| 37% | Over $578,125 | Over $693,750 |
What is the standard deduction for 2023?
When it comes to deductions, you can either use the standard deduction or itemize your deductions. Unless your itemized deductions sum up to be larger than the standard amount, you’ll likely fall back on the annual standard deduction for your filing status. Here are the 2023 standard deduction amounts:
- Single taxpayer or married filing separately: $13,850
- Head of household: $20,800
- Married filing jointly: $27,700
2024 tax brackets
The individual federal income tax brackets for 2024—which have been adjusted for inflation—determine how much tax you pay for your 2024. Here’s what to expect:
| Tax Rate | Single | Married Filing Jointly |
| 10% | $11,600 and under | $23,200 and under |
| 12% | Over $11,600 | Over $23,200 |
| 22% | Over $47,150 | Over $94,300 |
| 24% | Over $100,525 | Over $201,050 |
| 32% | Over $191,950 | Over $383,900 |
| 35% | Over $243,725 | Over $487,450 |
| 37% | Over $609,350 | Over $731,200 |
What is the standard deduction for 2024?
Here are the 2024 standard deduction amounts by filing status:
- Single taxpayer or married filing separately: $14,600
- Head of household: $21,900
- Married filing jointly: $29,200
What is the standard deduction for 2024?
Here are the 2024 standard deduction amounts by filing status:
- Single taxpayer or married filing separately: $14,600
- Head of household: $21,900
- Married filing jointly: $29,200
How to estimate your 2023 federal tax bill and 2024 quarterly tax payments
By crunching some numbers, you can estimate your business’s 2023 total federal tax bill and subsequent quarterly payments. Let’s do a couple of examples:
Example 1: Estimating total federal income taxes owed for 2023
Jane Cameron runs a single-member LLC specializing in web design services. She earned $80,000 in income in 2023, plus $3,000 from her job as an assistant soccer coach at a local university. She has $8,000 in business deductions, and can also take the 2023 standard deduction for single taxpayers of $13,850. Using the below formula, that brings her total taxable income down to $61,150.
Total income ($83,000) – business deductions ($8,000) – standard deduction ($13,850)
Because Jane is filing as a single taxpayer, her marginal tax rate is 22%. However, the entire $61,150 doesn’t get taxed at 22%. Only the amount over the minimum—which in this case is $44,725—gets taxed at the rate of 22%. The rest of the money is taxed at a lower rate, since it falls into the lower tax brackets. Here’s how the math works out:
$11,000 x 10% = $1,100
($44,725 – $11,000) x 12% = $4,047
($61,150 – $44,725) x 22% = $3,613.50
Adding up those numbers, Jane’s estimated federal income tax bill for 2023 would be $8,760.50.
Example 2: Estimating federal quarterly tax payments for 2024
Step 1
To estimate Jane’s quarterly payments, we have to start by calculating her self-employment tax. Because Jane earns more than $400 a year from her business, she has to pay self-employment tax; the current rate is 15.3% (12.4% for Social Security and 2.9% for Medicare). The amount of money subject to self-employment tax is roughly 92.35% of a business’s net earnings.
So, to calculate Jane’s estimated quarterly tax payments for 2024, we have to use the below formula:
Estimated net earnings for 2024 x 92.35% x 15.3% = estimated self-employment taxes
Based on her 2023 earnings, let’s say Jane estimates she’ll be able to bring in $95,000 in 2024.
$95,000 x 92.35% x 15.3% = $13,423
Step 2
Next, we have to calculate Jane’s estimated income tax for 2024. We’ll use the same formula as Example 1, but with the updated figures from the 2024 individual income tax brackets.
Total net profits – business deductions – standard deduction
Jane estimates she’ll earn $95,000 in total net profits, have roughly $10,000 in business deductions, and have the 2024 standard deduction of $14,600.
$95,000 – $10,000 – $14,600 = $70,400
She still falls into the 22% tax bracket.
$11,600 x 10% = $1,160
($47,150 – $11,600) x 12% = $4,266
($70,400 – $47,150) x 22% = $5,115
Adding up those numbers, Jane’s estimated federal income tax bill for 2024 would be $10,541.
Step 3
To figure out Jane’s estimated federal quarterly payments for 2024, we have to add up her estimated income taxes owed (from Step 2) and her estimated self-employment taxes owed (from Step 1), then divide by four quarters.
(Estimated income taxes owed + estimated self-employment taxes owed) / 4 = quarterly payment
($10,541 + $13,423) / 4 = $5,991
That means Jane can plan on making an estimated tax payment of $5,991 each quarter.
Though these formulas can be helpful for gauging how much money you owe in taxes, keep in mind that they are just simple examples. It’s important to consult a tax professional who can account for your business’s unique tax considerations, and help guide you through the process of organizing paperwork and making payments.
Other types of small business taxes
While most small businesses don’t directly pay income tax, there are many other types of taxes that a small business has to account for:
- Payroll taxes: If you have employees, you have to pay taxes on the money they earn. That includes Social Security and Medicare taxes, unemployment taxes, and federal and state income tax withholding.
- Excise taxes: Depending on your business’s industry and offerings, you may have to pay excise taxes, which the IRS imposes for certain goods, services, and activities. Owning a heavy highway vehicle and wagering on sports are just two examples.
- State taxes: Similar to federal income tax, owners/partners of small business interests may be subject to state income tax. You can check your state’s official website or search for your state to find out the income tax rate as well as your state’s quarterly estimated tax requirements.
- Property taxes: If your business owns a building or land, you have to pay property taxes.
How and when to file business taxes
Unless you file for an extension, the filing due date for taxes this year is April 15, 2024, though you can file them any time after January 29, 2024. The form you need to file depends on your business structure:
| Business Structure | Tax Form |
| C corp | Form 1120 |
| S corp | Form 1120-S |
| LLC | Form 1065 |
| Sole proprietorship | Form 1040 |
| Partnership | Form 1065 |
As illustrated in the earlier example, some business owners are also responsible for paying quarterly taxes. If you need to pay those, both federal and state payments have the same deadlines::
- Quarter 1: April 15, 2024
- Quarter 2: June 17, 2024
- Quarter 3: September 16, 2024
- Quarter 4: January 15, 2025
It’s never too early to start getting organized for tax payments. If you need additional help, consider reaching out to a tax professional or check out some of our other guides.
Quick note: This is not to be taken as tax advice. Since tax rules change over time and can vary by location and industry, consult a CPA or tax advisor for specific guidance.