US Small Business Tax Guide: Structures, Deductions & Deadlines

The IRS estimates small businesses overpay federal taxes by an average of $12,000 per year. With TCJA partial sunset in 2026, the stakes are even higher.

Entity Structures

• Sole Proprietorship: Schedule C, self-employment tax on all net profit
• LLC: Default pass-through, can elect S-Corp or C-Corp
• S-Corporation: Only wages subject to payroll tax, not distributions
• C-Corporation: Flat 21% rate, but double taxation on distributions

2026 Tax Rate Changes

TCJA individual provisions sunset:

• Rates revert: 10%, 15%, 25%, 28%, 33%, 35%, 39.6%
• Standard deduction decreases to ~$8,350 (single) / ~$16,700 (joint)
• C-Corp 21% rate is permanent and unaffected

A business owner earning $200,000 in pass-through income could see their effective federal rate increase by 2-4 percentage points in 2026. Planning now is essential.

Section 199A QBI Deduction

20% deduction on qualified business income. But set to expire after 2025. If not extended, unavailable for 2026. Monitor legislation closely. See financial metrics SME owners should track.

Self-Employment Tax

15.3% on net earnings (12.4% Social Security up to ~$174,900, 2.9% Medicare). Additional 0.9% Medicare surtax above $200K/$250K.

Quarterly Estimated Payments

• Q1: April 15 | Q2: June 15 | Q3: September 15 | Q4: January 15, 2027

Pay 100% of prior year's liability (110% if AGI >$150K) or 90% of current year. See our cash flow management guide.

Key Deductions

• Home office: $5/sq ft (up to 300 sq ft) or actual expenses
• Vehicle: Standard mileage (~$0.70/mile) or actual expenses
• Health insurance: 100% deductible for self-employed
• Retirement: SEP-IRA (25% of net), Solo 401(k) ($23,500 + $7,500 catch-up)

Section 179 and Bonus Depreciation

Section 179 limit ~$1,250,000. Bonus depreciation drops to 20% in 2026 (from 40% in 2025). Plan large purchases accordingly.

Key Deadlines

• Jan 31: W-2s and 1099-NEC due
• Mar 15: S-Corp and partnership returns
• Apr 15: Individual, sole prop, C-Corp returns
• Sep 15: Extended S-Corp/partnership returns
• Oct 15: Extended individual/C-Corp returns

Disclaimer: This article is for informational purposes only and does not constitute legal, financial, or regulatory advice. Always verify current requirements with official sources or a qualified advisor before taking action.

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