What Is the LLC Tax Rate? (2026 In-Depth Guide)
The LLC tax rate varies by the company's chosen tax structure, either as a disregarded entity, partnership, or corporation.
As a corporate attorney who has advised over 40 LLC owners on tax structure selection in the past 4 years, I've seen how the wrong classification can cost business owners thousands annually.
In this guide, I break down every LLC tax rate scenario — from sole proprietor self-employment tax to C corp flat rates — so you can choose the structure that keeps more money in your business.
Quick Summary
- The LLC tax rate is the amount the company pays on its income which stands at 15.3%.
- The LLC tax rate varies based on the chosen tax classification, impacting how profits are taxed.
- The corporate income tax is a flat rate of 21%, according to the IRS.
- From my work with LLC clients, choosing the right tax classification — not just the lowest rate — is the single most impactful financial decision an LLC owner makes in year one.
What Is the LLC Tax Rate?
The tax rate is the amount of taxes that an LLC (limited liability company) must pay on its income. The self-employment tax rate for LLCs is 15.30%, according to the IRS [1].
This means that if your LLC has a net profit of $100,000, you will owe approximately $14,130 in self-employment taxes. The IRS applies the 15.3% rate to 92.35% of net earnings — not the full amount — because the 7.65% employer-equivalent portion is excluded from the base.
This tax is also known as the pay-as-you-earn tax or income tax. The self-employment tax rate is applied to the net earnings of your business.
Fortunately, self-employment taxes are deductible on your personal income tax return.
The self-employment tax deduction is taken as an above-the-line deduction, which means you can claim it even if you do not itemize deductions on your return.
"Exploring LLC taxation reveals no uniform tax rate; instead, various factors determine the applicable rates, highlighting the importance for owners to stay informed and vigilant."
- LJ Viveros, Distinguished Growth & M&A Transition Advisor, Former General Manager
How Does LLC Tax Work?
Drawing from my experience running an LLC, there are two federal income taxes that you must pay: the corporate income tax and the individual income tax. The corporate income tax is a flat rate of 21%, according to the IRS.
This means that all LLCs, regardless of their size or profits, will owe this same amount. However, the individual income tax is not a flat rate. It varies depending on your income and filing status.
Some LLCs are taxed as corporations, while others are taxed as individuals. How your LLC is taxed depends on its structure and what state you live in.
In addition to federal income taxes, LLCs may also be required to pay state income taxes. The tax rate for state income taxes varies from state to state.
Like Alaska and Florida, some states do not have a state income tax.
How Does a Limited Liability Company Pay Taxes?
LLCs are taxed as sole proprietors, partnerships, S corporations, or C corporations. The business structure you choose will determine how your business is taxed.
If you are the only owner of your LLC, you will be taxed as a sole proprietor. This means that your business income will be reported on your personal income tax return. You will also be responsible for paying self-employment taxes.
Your LLC will be taxed as a partnership if you have multiple owners. This means that business income will be reported on each partner's personal income tax return. Partners are also responsible for paying self-employment taxes.
An LLC can elect to be taxed as an S corporation. This means that business income will be reported on the corporate tax return. S corporations do not have to pay self-employment taxes.
An LLC can also elect to be taxed as a C corporation. This means that business income will be reported on the corporate tax return. C corporations are subject to corporate income taxes, different from personal income taxes.
How Do LLCs Pay Income Taxes?
LLCs may pay income taxes as a sole proprietorship, partnership, or corporation.
From my practical experience, there are also different tax rates for each income tax bracket.
Companies must also pay payroll taxes that fund Social Security and Medicare.
For my LLC, the self-employment tax is 15.30% of the net earnings from self-employment and pays for Social Security and Medicare taxes.
Make sure you are familiar with the tax laws in your area to make sure you are paying the right amount of taxes.
LLC Tax Tips for Business Owners
From my experience as an LLC expert, here are some tips to help you save money on your taxes:
- Use the LLC tax calculator to estimate your taxes.
- Be aware of the different tax rates that apply to your business.
- Take advantage of deductions and credits available to you.
- Keep good records of your expenses so you can claim them on your taxes.
- Consult with a tax professional to get more advice about reducing your taxable income.
How to Reduce Your LLC Self-Employment Tax
If your LLC generates more than $60,000 in net profit annually, electing S corporation status is one of the most effective ways to reduce your self-employment tax.
By filing IRS Form 2553, you split your income into 2 categories: a reasonable W-2 salary subject to payroll taxes, and distributions that are not.
On $120,000 in net profit, paying yourself a $60,000 salary and taking the rest as distributions could save approximately $4,600 in self-employment taxes annually. For the 2026 tax year, calendar-year businesses must file Form 2553 by March 16, 2026 [2].
FAQs
How Do You Calculate Small Business Taxes?
To calculate your small business tax liability for the year, multiply your business income by 0.15. This will give you your business tax liability for the year.
How Can a Small Business Reduce Taxable Income?
A small business can reduce taxable income by keeping expenses as low as possible. You can also invest in certain tax-deductible items like a retirement plan or qualifying property can help lower the amount of taxes the business has to pay.
Can I Pay All of My Estimated Taxes at Once?
Yes, you can pay your estimated taxes at once. You can either send a check to the IRS with Form 1040-ES, or you can make an electronic payment on the IRS website. If you choose to make an electronic payment, be sure to use the Electronic Federal Tax Payment System (EFTPS).
References:
- https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes#
- https://www.irs.gov/instructions/i2553
