How to Estimate Your Business Taxes: A Step-by-Step Guide

Step 1: Calculate Net Profit

Start with your gross revenue and subtract all business expenses. The result is your net profit, which is the basis for most tax calculations.

Step 2: Self-Employment Tax

Multiply net profit by 92.35%, then apply the 15.3% SE tax rate. Remember, only the first $168,600 is subject to Social Security tax.

Step 3: Federal Income Tax

Subtract the QBI deduction (20% of net profit), half of SE tax, and the standard deduction ($15,000 for 2025). Apply the progressive federal tax brackets to the result.

Step 4: State Income Tax

Apply your state's income tax rate to your net profit. Nine states (AK, FL, NV, NH, SD, TN, TX, WA, WY) have no income tax on earned income.

Step 5: Add It All Up

Total Tax = Federal Income Tax + State Income Tax + SE Tax. Your effective rate is Total Tax divided by Gross Revenue.

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