Figuring out taxes as a small business owner can feel overwhelming. There’s no single tax form or fixed rate for all businesses, and tax planning must account for fluctuating income, changing federal laws, and your specific business structure. Understanding the S Corporation tax rate is key to making smart financial decisions for your business.
What Is the Federal Small Business Tax Rate?
Your tax rate depends largely on how your business is structured:
- C Corporations pay a flat corporate tax rate, currently 21% as of early 2026.
- S Corporations, partnerships, and sole proprietorships are pass-through entities, meaning business income passes through to your personal tax return. You’ll pay federal taxes on this income at your personal tax rate, which ranged from 10% to 37% in 2025.
- LLCs can choose whether to be taxed as a pass-through entity or as a corporation, giving flexibility in tax planning.
Recent 2025 updates include:
- Standard deduction increases: +$400 for singles, +$800 for married couples, +$600 for head of household.
- 10% and 12% tax brackets have been aligned in 2025, simplifying calculations.
Estimating Your 2025 Small Business Taxes
Once you know your revenue, estimating taxes is straightforward. Revenue is the total income from sales or services before expenses like cost of goods sold (COGS) or operating costs are deducted.
Example for a C Corporation:
- Taxable income: $100,000
- Tax rate: 21%
- Tax Due = $100,000 × 21% = $21,000
Example for an S Corporation (pass-through):
- Business earnings: $150,000
- Personal tax rate: 32%
- Tax Due = $150,000 × 32% = $48,000
Ways to Reduce Small Business Taxable Income
S Corporation owners and other small business operators can reduce tax liability through deductions, credits, and careful planning:
- Deductible Business Expenses: Office supplies, travel, marketing, and more. Keep receipts for all expenses.
- Home Office Deduction: If part of your home is used exclusively for business, deduct a portion of the mortgage, utilities, or rent.
- Retirement Contributions: Contributions to 401(k)s, SEP IRAs, or other plans are tax-deductible.
- Section 179 Deduction: Deduct costs of equipment, machinery, or other business assets.
- Business Tax Credits: Take advantage of programs like the Work Opportunity Tax Credit (WOTC) or Small Business Health Care Tax Credit.
- Consult a Professional: Accountants provide personalized advice based on your business structure, income, and local laws.
Key Small Business Tax Deadlines for 2026
Small businesses must often pay estimated quarterly taxes instead of one lump sum to avoid penalties. Key 2026 dates:
- April 15, 2026: First quarter estimated tax due; deadline to file extensions; deadline to make IRA/HSA contributions for the 2025 tax year.
- June 16, 2026: Second quarter estimated tax due. (June 15 falls on a Sunday in 2026, so the deadline shifts to Monday, June 16.)
- September 15, 2026: Third quarter estimated tax due.
- January 15, 2027: Fourth quarter estimated tax due.
Other important dates:
- January 31, 2026: Employees must receive W-2 forms; independent contractors must receive 1099 forms.
- March 16, 2026: Deadline to switch business election to S Corporation for 2025 taxes.
- October 16, 2026: Deadline to file the extended 2025 tax return.
How an Accountant Can Help
A knowledgeable accountant is one of the best investments for an S Corporation owner. They can:
- Review past filings for missed deductions and potential refunds.
- Minimize tax liability by leveraging credits, deductions, and your specific business structure.
- Track tax deadlines to prevent penalties.
- Provide support in case of IRS audits, including direct communication with the IRS if needed.
By working with a professional, you can focus on growing your business while staying compliant and maximizing your savings.
Final Thoughts
Understanding the S Corporation tax rate and planning accordingly is crucial for small business owners. By estimating taxes, utilizing deductions and credits, and staying on top of deadlines, you can reduce liability and avoid costly surprises. Professional guidance ensures that your business takes full advantage of available tax benefits while remaining compliant with federal and state laws.
