Understanding business taxation is essential for entrepreneurs, startups, and established businesses. Taxes impact your profits, legal compliance, and financial planning. Whether you operate as a sole proprietor, LLC, or corporation, knowing the tax laws can help you save money and avoid legal trouble. This guide covers the key types of business taxes, tax deductions, and compliance strategies to help you navigate the complex world of taxation.
Businesses must report their earnings and pay federal and state income taxes.
Sole proprietors report business income on their tax returns.
Corporations file separate tax returns and may face double taxation.
Covers Social Security and Medicare for self-employed individuals.
Currently set at 15.3%, covering both employer and employee portions.
Businesses with employees must withhold income tax and contribute to Social Security and Medicare.
Employers must also pay federal unemployment tax (FUTA).
Applies to businesses selling taxable goods and services.
Sales tax rates vary by state and locality.
Applies to specific goods such as fuel, alcohol, and tobacco.
Businesses in these industries must register and report excise taxes.
Rent, utilities, and office supplies are deductible business expenses.
Internet and software subscriptions also qualify.
Wages, health insurance, and retirement contributions are deductible.
If you run a business from home, you can deduct a portion of rent, utilities, and mortgage interest.
Business-related travel, including airfare, lodging, and meals, is tax-deductible.
Use the IRS standard mileage rate for deducting vehicle expenses.
Digital ads, website development, and promotional materials can be deducted.
Maintain receipts, invoices, and financial statements for at least three years.
Quarterly estimated taxes apply to self-employed individuals.
April 15 is the general deadline for federal income tax filings.
Open a business bank account to avoid IRS red flags.
A certified accountant can help you maximize deductions and stay compliant.