Business Income Tax Estimator
Estimate your federal tax under current post-OBBBA 2025/2026 law, tailored to how your business is taxed — sole prop, partnership, S-corp, or C-corp.
Written by Dorothy Ibrahim, 10+ years in banking & finance
Reviewed by Benton Jona, EA (Enrolled Agent) — 2026-07-13
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How we calculate this
This calculator estimates your total federal tax — income tax plus self-employment tax, payroll FICA, or corporate tax, depending on how your business is taxed — under post-OBBBA law for tax years 2025 and 2026 (default 2026). It applies the current IRS brackets, the standard deduction, the qualified business income (QBI) deduction, and the correct Social Security wage base for the year you pick, then interprets the result as an effective and marginal rate so you can see what the next dollar you earn actually keeps.
The formulas
- Self-employment tax (sole prop / partnership share)
- net earnings = net business income × 0.9235; SE tax = 12.4% × min(net earnings, Social Security wage base) + 2.9% × net earningsThe $184,500 wage base applies for 2026 ($176,100 for 2025). An additional 0.9% Medicare tax applies above $200,000 single / $250,000 married filing jointly.
- Half-SE deduction (above the line)
- 0.5 × self-employment tax
- QBI deduction (§199A, simplified)
- 20% × min(qualified business income, taxable income before QBI)Above the 2026 phase-in threshold ($201,750 single / $403,500 MFJ), SSTB and W-2 wage limits may reduce this — the tool simplifies there and says so. A $400 minimum deduction applies for 2026 when QBI is at least $1,000.
- Taxable income (pass-through)
- net business income + other household income − half-SE deduction − standard (or itemized) deduction − QBI deduction2026 standard deduction: $16,100 single / $32,200 MFJ / $24,150 HOH.
- Federal income tax
- apply the marginal brackets for your filing status and tax year to taxable income
- S-corp path
- FICA = 15.3% × min(owner salary, wage base) + 2.9% above it; income tax on salary + distributions; QBI = 20% × distributions onlyS-corp wages are not QBI; only the pass-through profit is.
- C-corp path
- corporate tax = 21% × net business income; optional second layer taxes distributed dividends at qualified-dividend rates (0/15/20% + 3.8% NIIT)
- Total federal tax
- income tax + SE tax or FICA + additional Medicare + corporate tax + dividend tax
Worked example
- Take the defaults: a sole proprietor with $120,000 of net business income, single filer, standard deduction, tax year 2026.
- Net earnings = $120,000 × 0.9235 = $110,820. SE tax = 12.4% × $110,820 + 2.9% × $110,820 = $13,741.68 + $3,213.78 = $16,955.46.
- Half-SE deduction = $8,477.73. Income before QBI = $120,000 − $8,477.73 − $16,100 standard deduction = $95,422.27.
- QBI deduction = 20% × min($120,000, $95,422.27) = $19,084.45, leaving taxable income of $76,337.82.
- Income tax on $76,337.82 (2026 single brackets) = $1,240 + $4,560 + 22% × $25,937.82 = $11,506.32.
- Total federal tax = $11,506.32 + $16,955.46 = $28,461.78 — a 23.7% effective rate, 22% marginal, leaving $91,538.22 take-home.
Rates, benchmarks & sources
- 2026 federal income tax brackets and standard deductions ($16,100 single / $32,200 MFJ); brackets made permanent by OBBBA — IRS Rev. Proc. 2025-32
- 20% QBI deduction, 2026 phase-in thresholds ($201,750 single / $403,500 MFJ), and the $400 minimum deduction starting 2026 — OBBBA §199A (permanent); Rev. Proc. 2025-32 §4.26
- SE/FICA rates (12.4% Social Security + 2.9% Medicare), the $184,500 Social Security wage base for 2026, the 0.9% additional Medicare thresholds, and the 92.35% net-earnings multiplier — SSA (2025-10-24); IRS; PayrollOrg (2026)
- 21% flat C-corporation tax rate — IRC §11 (flat, permanent)
Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.
What this tool doesn’t model
- Federal only — no state or local income tax, no state franchise or entity-level taxes. State treatment of pass-throughs varies widely.
- The QBI deduction is simplified: above the phase-in threshold the tool does not model SSTB status or the W-2 wage / UBIA limits, which can reduce or eliminate the deduction.
- No credits (child tax credit, retirement contributions, etc.), no capital-gain income, and no NOL carryforwards — a business loss simply shows $0 tax with an NOL note.
- The C-corp dividend layer uses long-term capital-gain breakpoints that are approximate for 2026 and flagged verify-at-build in our config.
- This is an estimate for planning, not filing advice — actual returns involve many items this tool does not collect.
Frequently asked questions
Does this include state income tax?
No — this tool estimates federal tax only: federal income tax, self-employment tax or FICA, and corporate tax where applicable. State income tax, state franchise taxes, and local taxes are all out of scope and can add meaningfully to the total. Treat the result as a planning estimate, not a complete tax bill or filing advice.
Why is my effective rate so much lower than my marginal rate?
The US system is marginal: only the dollars inside each bracket are taxed at that bracket's rate, and the standard deduction plus the QBI and half-SE deductions shelter a slice of income entirely. Your effective rate is total tax divided by total income; your marginal rate is what the next dollar pays. In the default example they are 23.7% and 22% respectively.
What is the QBI deduction and do I qualify?
Section 199A lets most pass-through owners deduct 20% of qualified business income, and OBBBA made it permanent. Below the 2026 phase-in threshold ($201,750 single / $403,500 married filing jointly) it applies with few strings. Above that, specified service businesses and the W-2 wage limits can reduce it — this tool simplifies that zone and flags it when you cross the threshold.
Why does the S-corp option show a different tax than sole proprietor at the same income?
A sole proprietor pays self-employment tax on essentially all profit, while an S-corp owner pays FICA only on the W-2 salary — distributions escape it. The trade-off: the IRS requires reasonable compensation for the work you do, S-corp wages are excluded from QBI, and the entity adds real compliance costs. The Entity Comparison tool models the full trade including those costs.
What does "double taxation" mean for a C-corp?
The corporation pays a flat 21% on its profit, and if it then distributes the remainder to you as dividends, you pay personal tax again at qualified-dividend rates (0/15/20% plus 3.8% NIIT above the thresholds). Profits retained inside the corporation avoid the second layer until distributed — the toggle in this tool shows both views.
Which tax year should I pick?
Pick the year the income will be reported in. The tool defaults to 2026 and carries both 2025 and 2026 constants — brackets, standard deductions, and the Social Security wage base ($176,100 for 2025, $184,500 for 2026) all differ by year, so the same income produces slightly different results in each.
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themoneysheet provides educational estimates, not financial, tax, or legal advice. Figures use published rates and formulas current as of the date shown, but your situation may differ. Consult a qualified professional (CPA, attorney, or licensed advisor) before making financial decisions. Federal figures only unless noted. State taxes vary.