There is no single LLC tax rate that applies across the country. Because an LLC is a pass-through entity by default, the business itself usually owes no federal income tax, and what shows up on your bill is a stack: federal income tax at your personal marginal rate, self-employment tax of 15.3% on earnings up to $184,500, and a state layer that varies dramatically. That state layer is what makes LLC tax rates by state such a moving target. Some states charge nothing on your LLC’s profits. Others impose a personal income tax above 10%, a fixed annual fee in the hundreds or thousands of dollars, a franchise tax on net worth, a gross receipts tax on every dollar of revenue, or some combination of all four.
What you actually owe depends on where your LLC is registered, where it does business, how much it earns, and whether you’ve made any special tax elections. The sections below walk through each layer.
How LLCs Are Taxed by Default
Most states follow the federal government’s classification. A single-member LLC is treated as a disregarded entity, so you report business income and expenses on Schedule C of your personal return. A multi-member LLC defaults to partnership treatment, files Form 1065, and issues each member a Schedule K-1 with their share of income and deductions.1Internal Revenue Service. Partner’s Instructions for Schedule K-1 (Form 1065) Each member reports that share on their personal return.
Because the LLC itself typically owes no income tax, the “state income tax rate” on your LLC is really your personal state income tax rate applied to your share of the profits. If your state’s rate is 5% and your share of profits is $100,000, the state income tax on that income is roughly $5,000 before deductions and credits. Straightforward math, but the variation across states is where planning matters.
State Income Tax on LLC Profits
Nine states impose no broad-based personal income tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire. If you live and operate your LLC entirely within one of these states, your LLC profits are not hit by a personal state income tax on your return. Several of these states, though, substitute other business taxes covered in the sections below.
Among states that do have a personal income tax, rates range from under 4% to over 13%. Some use a flat rate; others use graduated brackets. The top marginal rates in California, New Jersey, and New York exceed 10%. Arizona, North Dakota, and Indiana sit below 4%. Your LLC’s effective state income tax rate is whatever your personal marginal rate happens to be on the income the LLC pushes through to you.
Franchise Taxes and Annual Minimums
Many states charge a fee for the legal privilege of existing as an LLC in the state. These are owed whether or not the business turned a profit, which makes them the floor of your annual cost.
California is the most expensive. Every LLC doing business in California or organized there owes an $800 annual tax regardless of income. A first-year exemption that ran from 2021 through 2023 has expired, so LLCs formed in 2024 or later owe the $800 in year one.2State of California Franchise Tax Board. Limited Liability Company California adds a tiered fee on top of the $800 when California-source income crosses $250,000:3State of California Franchise Tax Board. Limited Liability Company Filing Information
- $250,000 to $499,999: $900
- $500,000 to $999,999: $2,500
- $1,000,000 to $4,999,999: $6,000
- $5,000,000 or more: $11,790
A California LLC with $600,000 in profit owes $800 plus $2,500 before its owners calculate any personal income tax.
New York charges a tiered annual filing fee tied to New York-source gross income from the prior year, ranging from $25 for LLCs under $100,000 to $4,500 for LLCs over $25 million.4New York State Department of Taxation and Finance. Partnership, LLC, and LLP Annual Filing Fee
Delaware, one of the most popular states for LLC formation, charges a flat $300 annual franchise tax on every LLC regardless of income or activity.5Delaware Division of Corporations. LLC/LP/GP Franchise Tax Instructions
Tennessee imposes both a franchise tax and an excise tax. The franchise tax is 0.25% of the entity’s net worth with a $100 minimum, and it applies even to inactive entities.6Tennessee Department of Revenue. Franchise and Excise Tax Tennessee eliminated the tangible property measure of the franchise tax for tax years ending on or after January 1, 2024, so the base is now net worth only.7Tennessee Department of Revenue. Important Notice – Franchise Tax Property Measure Repeal The excise tax stays at 6.5% of Tennessee taxable income.8Tennessee Department of Revenue. Due Dates and Tax Rates
Most other states charge annual report or registration fees that run from roughly $9 to several hundred dollars. Modest individually, but an LLC registered in multiple states pays each one separately.
Gross Receipts and Margin Taxes
Several no-income-tax states replace personal income tax with a tax on business revenue. These taxes hit hardest when margins are thin because you owe on every dollar of sales whether or not you kept any of it.
Texas imposes the Margin Tax, which functions as a gross receipts tax with limited deductions. The base is total revenue minus the greater of cost of goods sold or compensation. The rate is 0.375% for retail and wholesale and 0.75% for other entities. The no-tax-due threshold is $2,650,000 in total revenue for the 2026 and 2027 report years, so LLCs below that level owe nothing.9Texas Comptroller of Public Accounts. Franchise Tax
Ohio’s Commercial Activity Tax applies at 0.26% on taxable gross receipts. For 2025 and forward, only businesses with more than $6 million in Ohio gross receipts owe the CAT, up from the $3 million threshold that applied in 2024.10Ohio Department of Taxation. Commercial Activity Tax That higher threshold exempts many small and mid-sized LLCs entirely.
Washington levies a Business and Occupation tax on gross receipts, with rates that vary by industry classification. Service businesses pay 1.5% of gross receipts. No deduction for ordinary business expenses.
States That Tax the LLC Itself
A few states impose a mandatory entity-level income tax on LLCs even when the LLC is a pass-through for federal purposes. New Hampshire is the clearest example. It applies a Business Profits Tax of 7.5% on net business income and a separate Business Enterprise Tax of 0.55% on an enterprise value base that includes compensation, interest, and dividends paid.11NH Department of Revenue Administration. Business Taxes The BET can be credited against the BPT, so the two overlap rather than fully stack, but the LLC pays both directly before profits reach the owners. New Hampshire has no personal income tax on wages, yet business owners there face a real state tax bill through the BPT.
The Self-Employment Tax Layer
Before state taxes enter the picture, self-employment tax takes a significant bite that many LLC owners don’t factor in when they compare states. Every dollar of net profit from a default LLC is subject to a combined 15.3% self-employment tax covering Social Security (12.4%) and Medicare (2.9%).12Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The Social Security portion applies only up to $184,500 in earnings for 2026.13Social Security Administration. Contribution and Benefit Base The 2.9% Medicare tax has no cap. If self-employment earnings exceed $200,000 as a single filer or $250,000 as married filing jointly, an Additional Medicare Tax of 0.9% applies to the excess.
An owner clearing $150,000 in profit pays roughly $21,200 in self-employment tax alone. For most profitable LLCs, this layer exceeds the state income tax bill.
One way to reduce it is to elect S-corporation treatment by filing IRS Form 2553, generally within two months and 15 days of the beginning of the tax year the election takes effect.14Internal Revenue Service. Filing Requirements for Filing Status Change Under S-corp treatment, you split your income into a reasonable salary (subject to payroll taxes) and a distribution of remaining profits (not subject to self-employment or payroll tax). On $200,000 of LLC income with a $90,000 salary, only the $90,000 faces payroll taxes. The IRS scrutinizes what counts as “reasonable compensation” and can reclassify distributions as wages if the salary is set artificially low.15Internal Revenue Service. Wage Compensation for S Corporation Officers (FS-2008-25) The election also adds payroll processing and a separate corporate return, so it usually only makes sense when profits are high enough to cover the added compliance cost.
Operating in More Than One State
When your LLC does business in more than one state, two questions determine what you owe: which states can tax you, and what share of your income each state can claim.
A state can tax your LLC only if you have nexus there. Traditional nexus meant physical presence like an office, warehouse, or employee. After the Supreme Court’s 2018 Wayfair decision, most states also assert economic nexus based on sales volume or transaction count. Crossing a nexus threshold in a new state can trigger filing obligations, minimum taxes, and franchise fees on top of income tax.
Once a state has jurisdiction, apportionment formulas decide how much of your income it reaches. Most states now use a single sales factor, allocating income based on where your customers are. If 30% of your sales go to a single-sales-factor state, that state taxes 30% of your apportionable income.
Federal law offers one narrow shield. Under 15 U.S.C. Section 381, a state cannot impose a net income tax on your LLC if your only activity there is soliciting orders for tangible personal property that are approved and fulfilled from outside the state.16Office of the Law Revision Counsel. 15 USC 381 – Imposition of Net Income Tax The protection covers only net income tax. It does not shield you from franchise tax, gross receipts tax, or minimum annual fees, and it does not apply to services or digital products. Activities like on-site installation, post-sale support, or maintaining inventory in the state can strip the protection.17Multistate Tax Commission. Statement of Information Concerning Practices of Multistate Tax Commission and Supporting States Under Public Law 86-272
Cutting the State Bill With a Pass-Through Entity Tax Election
The 2017 federal tax law capped the state and local tax deduction at $10,000 on personal returns. For LLC owners in high-tax states, that turned state income taxes above $10,000 into non-deductible costs at the federal level. In response, 36 states now offer an elective pass-through entity tax (PTET).
Instead of the owners paying state income tax personally, the LLC pays at the entity level. The IRS confirmed in Notice 2020-75 that these entity-level payments are deductible on the LLC’s federal return as a business expense, outside the $10,000 SALT cap.18Internal Revenue Service. IRS Notice 2020-75 Owners then get a credit on their personal state returns to avoid double taxation.
The state income tax payment reduces the LLC’s federal taxable income dollar-for-dollar, lowering every member’s federal tax bill. New Mexico, for instance, taxes electing pass-through entities at 5.9%, the higher of its top personal and corporate rates.19NM Taxation and Revenue Department. Pass-Through Entity If you operate in a state that offers the election and your state income tax exceeds $10,000, PTET is almost always worth taking.
Quarterly Payment Deadlines
LLC owners don’t have taxes withheld, so you owe quarterly estimated payments to the IRS and to most states. For 2026, federal estimated payments are due April 15, June 15, and September 15 of 2026, and January 15, 2027.20Internal Revenue Service. IRS Publication 509 Most states follow the same schedule.
Missing a deadline triggers an underpayment penalty. The IRS interest rate on underpayments adjusts quarterly and is 7% as of early 2026.21Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026 The federal safe harbor is to pay at least 90% of your current-year tax or 100% of your prior-year tax through estimated payments and withholding (110% if your adjusted gross income was over $150,000). For LLC owners those payments cover both income tax and self-employment tax, so underestimating even modestly across four quarters can produce a penalty that feels disproportionate to the shortfall.