Calculate taxes for sole proprietors and small business owners. This tool helps you estimate your tax liability based on business income and expenses.
This tool is for educational and informational purposes only and does not constitute accounting, tax, or legal advice. Consult a qualified professional for personalized advice. Tax year: 2026.
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Sole Proprietor Tax Breakdown
Business Profit
$0
Self-Employment Tax
$0
Federal Income Tax
$0
State Income Tax
$0
Total Tax Liability$0
Effective Tax Rate0%
Net After-Tax Income$0
Recommended Quarterly Payment$0
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Business Income vs. Taxes
Understanding Sole Proprietor Taxes
As a sole proprietor, your business income is reported on Schedule C, and you're responsible for paying self-employment tax in addition to income tax. This is different from a corporation, where the business pays taxes separately from the owner.
Business Structure Basics
A sole proprietorship is the simplest business structure. You don't need to form a separate legal entity, and all business income and expenses are reported on your personal tax return (Schedule C).
Self-Employment Tax
Self-employment tax is 15.3% of your net business income. This includes 12.4% for Social Security (capped at $168,600 in 2026) and 2.9% for Medicare (no cap). You can deduct the employer portion when calculating income tax.
Income Tax
Your net business income is added to any other income and taxed at your marginal tax rate. You can take the standard deduction or itemize deductions.
Example Cases
Example 1: Small Business Owner, $60k Revenue
Business Income: $60,000, Expenses: $15,000, Profit: $45,000, Self-Employment Tax: $6,885, Federal Income Tax: $4,000, State Tax (CA): $2,200, Total Tax: ~$13,085
Example 2: Home-Based Business, $30k Revenue
Business Income: $30,000, Expenses: $8,000, Profit: $22,000, Self-Employment Tax: $3,366, Federal Income Tax: $0 (after standard deduction), Total Tax: ~$3,366
Calculation Methodology
Data Source:IRS Publication 533, IRS Schedule C Instructions
Last Updated:July 2026
Self-employment tax is calculated as 15.3% of 92.35% of net business income. Federal income tax uses 2026 IRS tax brackets. State tax rates vary by state. Business expenses are deducted from income to calculate profit.
A sole proprietorship is an unincorporated business owned and run by one person. There's no legal separation between the business and the owner.
Sole proprietors file Schedule C (Profit or Loss from Business), Schedule SE (Self-Employment Tax), and Form 1040. You may also need to file estimated taxes using Form 1040-ES.
You can deduct ordinary and necessary business expenses, including supplies, equipment, rent, utilities, insurance, travel, and professional services.
Incorporating offers liability protection but may have higher administrative costs and different tax rules. Consult a business advisor to determine what's best for your situation.