IRS-Verified · OBBBA 2026 · All Tax Figures Confirmed
LLC Taxes (2026): Complete Guide — How LLCs Are Taxed + Calculator
LLC taxes work differently from what most new business owners expect — there is no single "LLC tax rate." Instead, your LLC's income passes through to your personal return and is taxed at two separate rates: your federal income tax bracket (10–37%) plus self-employment tax at 15.3%. Understanding exactly how LLC taxes work in 2026, what deductions are available, and when to consider an S-Corp election can save you thousands per year.
Written & verified by Ahmad Adil, LLC School · Updated June 2026
LLC Taxes — Key Numbers (2026)
15.3%
Self-employment tax rate on 92.35% of net profit
20%
QBI deduction — now permanent under OBBBA (Section 199A)
25–30%
Rule of thumb — set aside this % of net profit for all taxes
April 15
Single-member LLC deadline (March 15 for multi-member)
How LLC Taxes Work — The Complete 2026 Picture
LLC taxes don't have a single rate — they have layers. By default, an LLC is a "pass-through" entity, meaning the LLC itself pays no federal income tax. Instead, profits flow to you personally and are taxed at two levels simultaneously: your ordinary income tax bracket (10–37%) plus self-employment tax at 15.3%. The total effective federal tax rate for most LLC owners is 25–40% when you combine both layers.
The most common shock for new LLC owners is realizing that "pass-through taxation" doesn't mean "low taxes." It means you pay taxes — just on your personal return rather than a corporate one. And because you pay both the employer and employee halves of Social Security and Medicare, the self-employment tax alone can exceed $14,000 on $100,000 of net profit.
The 2026 OBBBA update you need to know: The One Big Beautiful Bill Act (signed July 4, 2025) made the 20% QBI deduction permanent under Section 199A, added a new minimum $400 QBI deduction for owners with at least $1,000 in qualified business income, and raised the SALT deduction cap to $40,000. These are significant changes that benefit every LLC owner. The QBI deduction alone can reduce your federal tax liability by thousands of dollars annually. See the IRS 2026 inflation adjustments announcement for official numbers.
The 4 Ways LLC Taxes Can Be Structured
The IRS does not recognize "LLC" as a tax classification. Instead, your LLC chooses (or defaults to) one of four tax treatments. Which one applies to your LLC determines which forms you file, what rates you pay, and what planning opportunities you have.
Default — Single-Member LLC
Disregarded Entity
Schedule C + Form 1040
- IRS ignores the LLC — income taxed on owner's personal return
- File Schedule C (profit/loss from business) attached to Form 1040
- Filing deadline: April 15
- 15.3% SE tax on 92.35% of net profit
- Deduct 50% of SE tax above the line on Form 1040
- 20% QBI deduction available on qualified income
- Quarterly estimated taxes required
Default — Multi-Member LLC
Partnership
Form 1065 + Schedule K-1
- LLC files informational return; pays no entity-level federal tax
- File Form 1065 (partnership return) by March 15
- Issue Schedule K-1 to each member showing their share
- Each member files K-1 income on personal Form 1040
- Active members pay 15.3% SE tax on distributive share
- Passive members may not owe SE tax
- Late filing penalty: $260/partner/month
Tax Election — Any LLC
S-Corporation (Form 2553)
Form 1120-S + W-2 + K-1
- Pass-through taxation — no corporate-level tax
- Owner paid "reasonable salary" (W-2) — subject to payroll tax
- Remaining profit taken as distributions — NO SE tax
- File Form 1120-S by March 15
- SE tax savings kick in at ~$60K–$80K+ net profit
- Max 100 shareholders — US citizens/residents only
- Adds payroll complexity and CPA costs
Tax Election — Any LLC
C-Corporation (Form 8832)
Form 1120 (C-Corp return)
- LLC taxed as C-Corp — 21% flat corporate rate on profits
- Double taxation: profits taxed at entity level + dividends taxed personally
- File Form 1120 by April 15
- No QBI deduction available
- Makes sense for: VC-funded startups, profit retention strategy
- Allows ISO stock options, QSBS exclusion
- Rare for small businesses — complex and expensive
LLC taxes depend on which of four IRS classifications applies — the default for single-member LLCs is Schedule C (disregarded entity) and for multi-member LLCs is Form 1065 (partnership).
LLC Self-Employment Tax — The Layer Most People Underestimate
The biggest surprise in LLC taxes for most new owners is self-employment tax. When you worked as an employee, your employer paid half of your Social Security and Medicare taxes. As an LLC owner, you pay both halves — the full 15.3%.
Understanding exactly how SE tax is calculated, how it's deducted, and how an S-Corp election reduces it is essential for any LLC owner earning meaningful income.
How SE Tax Is Calculated — Step by Step
Step 1: Net ProfitTotal revenue minus all deductible business expenses (the number from Schedule C line 31)
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Multiply by 92.35%The IRS allows this adjustment because self-employed people don't get the employer's matching FICA deduction. Example: $100,000 × 0.9235 = $92,350
Step 2: SE Tax Base$92,350 in this example — this is what you pay 15.3% on (up to SS wage base of $184,500 for Social Security portion)
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× 15.3% = SE Tax Due$92,350 × 15.3% = $14,130 in SE tax on $100K net profit. Medicare applies to all earnings; Social Security caps at $184,500 wage base.
Step 3: Deduct 50% of SE TaxDeduct $7,065 (half of $14,130) as an above-the-line deduction on Form 1040 — this reduces your taxable income before calculating income tax
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Then Apply Income Tax BracketsAfter the half-SE deduction and the standard deduction, apply federal income tax brackets (10–37%) to your remaining taxable income
The Additional Medicare Tax: LLC owners with net self-employment income above $200,000 single or $250,000 married filing jointly pay an additional 0.9% Medicare surtax on the amount exceeding those thresholds. This is separate from the standard 2.9% Medicare rate. If your LLC generates $300,000 in net profit and you file single, you'll pay the additional 0.9% on $100,000 ($200K threshold - $300K income) = $900 extra. This is reported on Schedule SE.
LLC Tax Calculator (2026)
Enter your estimated net profit and filing status to see your complete 2026 LLC tax breakdown — self-employment tax, estimated federal income tax, QBI deduction savings, and the amount to set aside.
2026 LLC Tax Estimator
Based on 2026 tax year figures: 15.3% SE tax, standard deduction $16,100 single / $32,200 joint, QBI deduction 20% (OBBBA permanent), SS wage base $184,500.
Self-Employment Tax
—
15.3% on 92.35% of profit
Est. Federal Income Tax
—
After deductions + half-SE
Total Federal Tax Est.
—
Combine and pay quarterly
QBI Deduction Savings (20% of qualified income)
—
Set aside each quarter for estimated taxes
—
This is an estimate for educational purposes only. Does not account for state taxes, itemized deductions, credits, additional Medicare surtax, or other personal income. Consult a CPA for your specific situation. Standard deductions used: $16,100 single / $32,200 joint (2026).
LLC Tax Filing Deadlines & Quarterly Payment Dates (2026)
One of the most costly LLC tax mistakes is missing deadlines. There are two types to track: annual return deadlines (when you file your LLC's tax return) and quarterly estimated payment deadlines (when you pay estimated taxes throughout the year).
| LLC Tax Type / Event | 2026 Deadline | Form | Penalty for Missing |
|---|---|---|---|
| Single-Member LLC Annual Return | April 15, 2026 | Schedule C + Form 1040 | 5% of unpaid tax per month (max 25%) |
| Multi-Member LLC Partnership Return | March 17, 2026 (March 15 on Sunday) | Form 1065 | $260/partner/month — up to 12 months |
| S-Corp Elected LLC Return | March 17, 2026 | Form 1120-S | $260/shareholder/month — up to 12 months |
| Extension for Schedule C (SMLLC) | April 15, 2026 → extends to October 15 | Form 4868 | Extension is automatic if properly filed |
| Extension for Form 1065 / 1120-S | March 17, 2026 → extends to September 15 | Form 7004 | Extension is automatic if properly filed |
| Q1 Estimated Tax Payment (2025 income) | April 15, 2026 | Form 1040-ES | Underpayment penalty (currently ~8% annual rate) |
| Q2 Estimated Tax Payment | June 16, 2026 | Form 1040-ES | Underpayment penalty |
| Q3 Estimated Tax Payment | September 15, 2026 | Form 1040-ES | Underpayment penalty |
| Q4 Estimated Tax Payment | January 15, 2027 | Form 1040-ES | Underpayment penalty |
| S-Corp Election (Form 2553) — 2026 tax year | March 17, 2026 (75 days from Jan 1) | Form 2553 | Must file timely or election is invalid for 2026 |
Critical distinction: March 15 vs April 15. Multi-member LLC owners routinely confuse these dates. Your LLC's entity-level return (Form 1065) is due March 15 — one month before the personal return deadline. But the K-1 income from that return flows to your personal Form 1040, which is due April 15. Missing the March 15 Form 1065 deadline — even if you file your personal return on time — triggers the $260/partner/month penalty. File Form 7004 by March 15 if you need until September 15.
LLC taxes require quarterly estimated payments throughout the year — missing a payment triggers an underpayment penalty even if you pay the full balance at year-end.
Key LLC Tax Deductions for 2026
Reducing your LLC taxes starts with maximizing legitimate deductions. Every dollar of deductible business expense reduces your net profit — which reduces both your income tax and your self-employment tax. Here are the most impactful deductions available to LLC owners in 2026.
Home Office Deduction
Deduct $5/sq ft (simplified) or actual expenses
If you use a dedicated space in your home regularly and exclusively for your LLC, you can deduct a portion of rent/mortgage, utilities, and insurance proportional to that space. Maximum 300 sq ft under the simplified method = $1,500 deduction. Must be exclusive business use — a corner of a bedroom doesn't qualify.
Vehicle / Mileage Deduction
72.5 cents per business mile in 2026
Track every business-related mile driven. At 72.5 cents per mile in 2026, 10,000 business miles = $7,250 deduction. Must keep a contemporaneous mileage log with date, destination, business purpose, and miles. Alternative: deduct actual vehicle expenses (gas, insurance, maintenance) proportional to business use percentage.
QBI Deduction (Section 199A)
Deduct 20% of qualified business income — now permanent
The most powerful deduction available to LLC owners. If your taxable income is below ~$203K single / ~$406K joint (2026), deduct 20% of your net qualified business income. On $100K net profit, that's a $20,000 deduction reducing taxable income. Note: new minimum $400 deduction for owners with at least $1,000 in QBI. Service businesses face phase-out rules above those thresholds.
Retirement Plan Contributions
Deduct up to $70,000/yr (Solo 401k, SEP-IRA, SIMPLE)
LLC owners can contribute to a Solo 401(k) — $23,500 employee contribution + up to 25% of net self-employment income as employer contribution, total capped at $70,000 in 2026. Every dollar contributed reduces your taxable income dollar-for-dollar. A Solo 401(k) also reduces your QBI base, so coordinate with your CPA on the optimal contribution amount relative to your QBI threshold.
Health Insurance Premiums
Deduct 100% of premiums for self + family
Self-employed LLC owners can deduct 100% of health, dental, and long-term care insurance premiums paid for themselves, their spouse, and dependents — as an above-the-line deduction on Form 1040 (not just Schedule C). This deduction is not subject to the 7.5% AGI floor that medical deductions typically face. Cannot exceed the LLC's net profit for the year.
Section 179 / Bonus Depreciation
Deduct up to $1.32M immediately (Section 179, 2026)
Instead of depreciating equipment over its useful life, Section 179 lets you deduct the full cost in the year of purchase. 2026 limit: approximately $1.32 million. Bonus depreciation (60% in 2026 after OBBBA changes) lets you deduct a percentage of qualifying property cost immediately. Use this for computers, machinery, software, vehicles, and office equipment purchased for the LLC.
Half of Self-Employment Tax
Deduct 50% of SE tax paid as above-the-line deduction
The IRS allows you to deduct half of your self-employment tax from your gross income before calculating income tax. On $100K profit with $14,130 SE tax, you deduct $7,065 — reducing your taxable income before income tax is applied. This deduction automatically appears on Schedule 1 of Form 1040 and reduces both your income tax and your QBI calculation.
Travel, Meals & Other Business Expenses
50% for meals; 100% for ordinary/necessary business expenses
Business travel (flights, hotels, car rental) is 100% deductible when the primary purpose is business. Business meals are 50% deductible (must document business purpose, who attended, what was discussed). Other ordinary and necessary business expenses — software subscriptions, professional services, marketing, insurance, phone — are generally 100% deductible. Keep receipts and business purpose documentation for everything.
State LLC Taxes — What You Owe Beyond Federal
Federal LLC taxes are only part of the picture. Most LLC owners also owe state income taxes on their pass-through income, and some states charge additional LLC-specific fees and taxes that don't exist at the federal level.
States with no income tax — best for LLC owners
9 states with zero state income tax on LLC profits
Nine states impose no personal income tax, which means LLC owners pay no state income tax on their pass-through profits: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
However, "no income tax" doesn't mean "no state taxes." Several of these states impose other business taxes:
Texas: Franchise tax (margin tax) on LLCs with revenue above $2,650,000 in 2026 — most small LLCs exempt
Washington: Business and Occupation (B&O) tax on gross receipts — applies regardless of profitability
Nevada: $200/yr state business license + Modified Business Tax on gross wages above $62,500/quarter
New Hampshire: Business Profits Tax (7.5%) on profits above $50,000 — so income tax effectively exists for larger businesses
The truly no-income-tax, no-significant-business-tax states for LLC owners are: Wyoming, South Dakota, and Alaska. This is one reason Wyoming is recommended for out-of-state formation by non-residents.
However, "no income tax" doesn't mean "no state taxes." Several of these states impose other business taxes:
Texas: Franchise tax (margin tax) on LLCs with revenue above $2,650,000 in 2026 — most small LLCs exempt
Washington: Business and Occupation (B&O) tax on gross receipts — applies regardless of profitability
Nevada: $200/yr state business license + Modified Business Tax on gross wages above $62,500/quarter
New Hampshire: Business Profits Tax (7.5%) on profits above $50,000 — so income tax effectively exists for larger businesses
The truly no-income-tax, no-significant-business-tax states for LLC owners are: Wyoming, South Dakota, and Alaska. This is one reason Wyoming is recommended for out-of-state formation by non-residents.
California's unique LLC tax structure
$800/yr minimum + income-based fees — the most expensive state
California has the most complex and expensive LLC tax structure in the US. LLC owners face three separate California LLC taxes:
1. State income tax (0–13.3%): California has the highest top state income rate in the country at 13.3%. Pass-through LLC income is taxed at the owner's personal CA state income tax rate.
2. $800/yr minimum franchise tax: Required annually from every California LLC (domestic and foreign registered). Due even if the LLC has zero revenue. Filed with Form 568 (Limited Liability Company Return of Income).
3. LLC fee (income-based): Additional annual fee based on total California gross income: $900 (income $250K–$499K), $2,500 ($500K–$999K), $6,000 ($1M–$4.99M), $11,790 ($5M+).
Total annual California LLC cost for a profitable business can easily exceed $5,000–$15,000 in state taxes alone. This is why profitable LLCs with California nexus need a CPA experienced in California LLC taxation.
1. State income tax (0–13.3%): California has the highest top state income rate in the country at 13.3%. Pass-through LLC income is taxed at the owner's personal CA state income tax rate.
2. $800/yr minimum franchise tax: Required annually from every California LLC (domestic and foreign registered). Due even if the LLC has zero revenue. Filed with Form 568 (Limited Liability Company Return of Income).
3. LLC fee (income-based): Additional annual fee based on total California gross income: $900 (income $250K–$499K), $2,500 ($500K–$999K), $6,000 ($1M–$4.99M), $11,790 ($5M+).
Total annual California LLC cost for a profitable business can easily exceed $5,000–$15,000 in state taxes alone. This is why profitable LLCs with California nexus need a CPA experienced in California LLC taxation.
Pass-Through Entity (PTE) Tax Elections
How 36 states allow LLCs to deduct state taxes at entity level
36 states now offer a Pass-Through Entity (PTE) Tax Election that allows LLCs to pay state income tax at the entity level rather than requiring each owner to pay it on their personal return. The PTE election was created in response to the original $10,000 SALT deduction cap under TCJA, which limited individual deductions of state taxes on personal returns.
How it works: The LLC pays state income tax directly (at the entity level). Each member then claims a credit on their personal state return for the state tax paid on their behalf by the LLC. The LLC deducts the PTE tax payment as a business expense on its federal return — reducing federal taxable income — effectively bypassing the SALT cap for that state tax.
2026 OBBBA update: The SALT cap was raised to $40,000 under OBBBA (indexed through 2029, then reverting to $10,000 in 2030 unless extended). This reduces the benefit of PTE elections for many taxpayers, but for high-income LLC owners in high-tax states like California, New York, and New Jersey, the PTE election still provides meaningful federal tax savings on state taxes paid. Consult a CPA experienced in your state's PTE election rules.
How it works: The LLC pays state income tax directly (at the entity level). Each member then claims a credit on their personal state return for the state tax paid on their behalf by the LLC. The LLC deducts the PTE tax payment as a business expense on its federal return — reducing federal taxable income — effectively bypassing the SALT cap for that state tax.
2026 OBBBA update: The SALT cap was raised to $40,000 under OBBBA (indexed through 2029, then reverting to $10,000 in 2030 unless extended). This reduces the benefit of PTE elections for many taxpayers, but for high-income LLC owners in high-tax states like California, New York, and New Jersey, the PTE election still provides meaningful federal tax savings on state taxes paid. Consult a CPA experienced in your state's PTE election rules.
LLC taxes can be reduced significantly through strategic use of 2026 deductions — the QBI deduction (20%), Solo 401(k) contributions ($70K max), home office, and mileage are the most impactful.
Ahmad Adil's Take: The most important number in LLC taxes that nobody tells you upfront is 25–30% of net profit — set that aside from every payment you receive. Self-employment tax alone takes 14.13% (15.3% × 92.35%), and then income tax adds another 10–37% depending on your bracket. Most first-year LLC owners get hit with a tax bill in April they never saw coming because nobody taught them to pay quarterly. Set aside the money, pay quarterly, and talk to a CPA once your net profit consistently exceeds $60,000–$80,000 — at that point the S-Corp election math starts working in your favor.
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Frequently Asked Questions
LLC Taxes FAQ (2026)
How are LLCs taxed in 2026?
LLCs are taxed as pass-through entities by default — the LLC itself pays no federal income tax. A single-member LLC files Schedule C with the owner's personal Form 1040 (due April 15). A multi-member LLC files Form 1065 (due March 15) and issues Schedule K-1 to each member. All active LLC owners pay self-employment tax at 15.3% on 92.35% of net profit, plus personal income tax at their applicable bracket (10–37%). The 20% QBI deduction (made permanent by the OBBBA) reduces taxable income for qualifying LLC owners. LLCs can also elect S-Corp (Form 2553) or C-Corp (Form 8832) taxation if beneficial.
What is the LLC tax rate in 2026?
There is no single "LLC tax rate." LLC taxes in 2026 come in two layers: (1) Self-employment tax: 15.3% on 92.35% of net profit (effectively 14.13% of net profit), which covers Social Security (12.4%, capped at $184,500 SS wage base) and Medicare (2.9%, unlimited). Plus an additional 0.9% Medicare surtax on income above $200K single / $250K joint. (2) Federal income tax: 10–37% at your marginal bracket, applied after deductions including the 20% QBI deduction and the half-SE tax deduction. Most LLC owners' effective combined federal rate falls between 25–40% depending on income level and deductions used.
Do LLCs pay self-employment tax?
Yes — active LLC members pay self-employment tax at 15.3% on 92.35% of their net profit or distributive share. This covers Social Security (12.4%) and Medicare (2.9%). Unlike W-2 employees who split these taxes with their employer, LLC owners pay both halves. You can deduct half of the SE tax paid as an above-the-line deduction on Form 1040. Passive LLC members who don't actively participate in the business may be exempt from SE tax on their K-1 income, but this depends on their level of material participation under IRS rules.
How do I pay quarterly estimated taxes for my LLC?
LLC owners must make quarterly estimated tax payments to the IRS if they expect to owe $1,000 or more in taxes for the year. The 2026 deadlines are: April 15 (Q1), June 16 (Q2), September 15 (Q3), and January 15, 2027 (Q4). Pay using IRS Form 1040-ES (mail a check) or pay online at IRS.gov/payments using Direct Pay or EFTPS. A safe approach: set aside 25–30% of each payment you receive, then pay it quarterly. The "safe harbor" rule: if you pay at least 100% of last year's total tax liability (or 110% for income over $150,000), you avoid the underpayment penalty regardless of what you owe in April.
What is the QBI deduction for LLCs in 2026?
The Qualified Business Income (QBI) deduction under Section 199A allows eligible LLC owners to deduct 20% of their qualified business income from their taxable income. For 2026, the OBBBA made this deduction permanent (it was previously scheduled to expire after 2025). The full 20% deduction is available for LLC owners with taxable income below approximately $203,000 (single) or $406,000 (joint). Above those thresholds, the deduction phases out — especially for Specified Service Trade or Business (SSTB) owners in fields like law, medicine, and financial services. A new minimum $400 QBI deduction applies in 2026 for owners with at least $1,000 in qualified business income.
When should an LLC elect S-Corp status to reduce taxes?
An LLC should consider S-Corp election when its net profit consistently exceeds $60,000–$80,000 per year. At that income level, the self-employment tax savings from splitting income between a reasonable salary (subject to payroll taxes) and distributions (not subject to SE tax) typically outweigh the added costs of payroll processing and S-Corp tax return filing. Below $60,000, the payroll service costs ($500–$2,000/yr) and additional CPA fees for Form 1120-S often exceed the SE tax savings. Model the exact numbers with a CPA before electing S-Corp status. See our LLC taxed as S-Corp guide for the complete analysis.
Does forming an LLC in Wyoming save me taxes if I live in California?
No — forming your LLC in Wyoming does not save you California taxes if you live and work in California. You owe taxes where you live and conduct business, not where your LLC was formed. A California resident with a Wyoming LLC still owes California state income tax (0–13.3%) on all California-source income, plus California's $800/yr minimum franchise tax when you register the Wyoming LLC as a foreign LLC in California. The total cost is often $700–$800+ more per year than simply forming a California LLC. The only way to legally avoid California's LLC taxes is to genuinely not live or do business in California.
About the Author
Ahmad Adil
Ahmad Adil is the founder and CEO of LLC School. The tax figures in this guide — 15.3% SE tax, $184,500 SS wage base, 20% QBI deduction, $70,000 Solo 401(k) max, 72.5¢/mile standard mileage rate, 2026 standard deductions ($16,100/$32,200), QBI phase-out thresholds (~$203K/$406K), and all filing deadlines — are verified against IRS Revenue Procedure 2025-32, the One Big Beautiful Bill Act (OBBBA, signed July 4, 2025), and current IRS publications as of June 2026. This guide is educational only — consult a licensed CPA for advice specific to your tax situation.
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