A single-member LLC pays no federal income tax of its own. For federal tax purposes, the IRS disregards the entity and treats every dollar of profit as yours, so single-member LLC taxes are really your personal taxes with a business schedule attached. You pay ordinary income tax at rates from 10% to 37% on the net profit, plus 15.3% self-employment tax on most of it, and you send the money in through quarterly estimated payments rather than waiting until April.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
How the IRS Treats a Single-Member LLC
Federal regulations classify a domestic business with one owner as a “disregarded entity” by default, unless the owner elects to be taxed as a corporation.2eCFR. 26 CFR 301.7701-3 – Classification of Certain Business Entities Disregarded means the IRS looks past the LLC and treats all business income, expenses, and losses as belonging directly to you. The LLC files no separate federal income tax return and pays no income tax at the entity level.
The upside is one layer of tax instead of two. A C corporation pays tax on its profits and shareholders pay again on dividends; your LLC’s profit gets taxed once, on your Form 1040. The trade-off is that you personally bear self-employment tax on that profit, which a C corporation’s shareholders don’t pay on dividends.
Income Tax on the Profit
Your LLC’s net profit is added to any other income you have for the year and taxed on the standard federal brackets. For 2026, single filers hit 22% at $50,401, 24% at $105,701, 32% at $201,776, 35% at $256,226, and 37% above $640,600; joint-filer thresholds are roughly doubled at the lower brackets and reach 37% above $768,700.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 These rates apply to taxable income after deductions, not to gross revenue.
You report business income and expenses on Schedule C, which attaches to your Form 1040.3Internal Revenue Service. About Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) The bottom-line profit or loss transfers to the 1040 and feeds the self-employment tax calculation on Schedule SE.
Self-Employment Tax
This is the piece that surprises new owners. Because you’re not a W-2 employee, no one is withholding Social Security and Medicare taxes from your pay. You owe both the employer and employee shares yourself: 12.4% for Social Security and 2.9% for Medicare, 15.3% combined.4Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax The tax kicks in any year your net earnings exceed $400.5Internal Revenue Service. Self-Employed Individuals Tax Center
The 12.4% Social Security portion applies only to earnings up to $184,500 in 2026.6Social Security Administration. Contribution and Benefit Base Above that, you stop paying the Social Security piece. The 2.9% Medicare portion has no cap.
Two built-in adjustments soften the hit. Schedule SE multiplies your net earnings by 92.35% before applying the rates, so a $100,000 net profit is taxed on a $92,350 base. And you can deduct half of the self-employment tax you calculate when figuring your adjusted gross income; that’s an above-the-line deduction, available whether or not you itemize.7Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The deduction lowers income tax; it does not reduce the self-employment tax itself.
Higher earners owe more. If your self-employment income exceeds $200,000 (single) or $250,000 (married filing jointly), an extra 0.9% Additional Medicare Tax applies to the amount above the threshold, bringing your effective Medicare rate to 3.8% on those dollars.8Internal Revenue Service. Topic No. 560, Additional Medicare Tax There’s no employer match and no offsetting deduction for this piece.
The 20% Qualified Business Income Deduction
Before calculating income tax, you can deduct up to 20% of your qualified business income. Originally set to expire after 2025, the deduction was made permanent by the One Big Beautiful Bill Act.9Internal Revenue Service. Qualified Business Income Deduction The mechanics are simple below the income thresholds: take your net profit from Schedule C, multiply by 20%, subtract from taxable income. The deduction reduces income tax only, not self-employment tax.
If your taxable income stays below roughly $191,950 (single) or $383,900 (joint), you generally get the full 20% with no complications. Above those levels, the deduction is limited to the greater of 50% of W-2 wages your business paid or 25% of W-2 wages plus 2.5% of qualified property. Owners of specified service businesses such as law, accounting, consulting, and medicine face a phaseout starting around $203,000 (single) or $406,000 (joint) for 2026 that eventually eliminates the deduction. On $120,000 of qualified business income, the full deduction knocks $24,000 off taxable income, worth several thousand dollars in federal tax depending on your bracket.
Deductions That Lower Both Taxes
Every legitimate business expense on Schedule C reduces net profit, which reduces both income tax and self-employment tax. That double benefit is why tracking expenses matters.
- Home office. Regular and exclusive business use of part of your home qualifies. The simplified method allows $5 per square foot up to 300 square feet, capped at $1,500. The regular method uses actual housing costs multiplied by the business-use percentage.
- Vehicle. The 2026 standard mileage rate is 72.5 cents per business mile. The alternative is tracking actual costs and applying the business-use percentage. Either way, keep a log with date, destination, and purpose. Commuting to a regular office doesn’t count.10Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents Per Mile
- Self-employed health insurance. You can deduct 100% of premiums for yourself, your spouse, and dependents as an above-the-line deduction on Schedule 1, as long as you aren’t eligible for coverage through a spouse’s employer plan.
- Equipment. The One Big Beautiful Bill Act restored 100% bonus depreciation for qualified property acquired after January 19, 2025, letting you deduct the full cost of equipment and qualifying vehicles in the year of purchase.11Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One Big Beautiful Bill
- Business meals. Meals with clients or while traveling for business are 50% deductible.
- Professional development. Courses, certifications, conferences, and memberships that maintain or improve existing skills qualify. Education that qualifies you for a new career does not.
Software, advertising, professional liability insurance, office supplies, and contractor payments (reported on Form 1099 when $600 or more) round out the typical list. Keep receipts or digital records; the IRS can ask for documentation years after you file.
Quarterly Estimated Payments
Since no one withholds taxes from your business income, you pay as you go through quarterly installments on Form 1040-ES. For tax year 2026, the due dates are April 15, June 15, September 15, and January 15, 2027.12Internal Revenue Service. 2026 Form 1040-ES, Estimated Tax for Individuals The January payment can be skipped if you file your return and pay the full balance by February 1, 2027. Most owners pay through the Electronic Federal Tax Payment System.13Internal Revenue Service. Electronic Federal Tax Payment System – A Guide to Getting Started
Miss a deadline or pay too little and you’ll owe an underpayment penalty calculated at the federal short-term rate plus three percentage points. Three safe harbors avoid it entirely:14Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
- You owe less than $1,000 after subtracting withholding and credits.
- You pay at least 90% of what you’ll owe for the current year.
- You pay at least 100% of your prior-year tax (110% if your prior-year AGI exceeded $150,000, or $75,000 if married filing separately).
The prior-year safe harbor is the practical favorite when income fluctuates: you already know last year’s number, so four equal payments protect you no matter what the current year does. Separately, if you file your annual return with a balance due, the failure-to-pay penalty is 0.5% of the unpaid amount each month, capped at 25%.15Internal Revenue Service. Failure to Pay Penalty
Electing a Different Tax Treatment
The disregarded classification is a default, not a requirement. You can elect something else by filing Form 8832.16Internal Revenue Service. About Form 8832, Entity Classification Election The LLC remains an LLC under state law regardless.
C-corporation status makes the LLC a separate taxpayer that files Form 1120 and pays a flat 21% corporate rate.17Office of the Law Revision Counsel. 26 USC 11 – Tax Imposed Dividends paid to you are then taxed again on your personal return. That double taxation makes C-corp status a poor fit for most single-member owners; it mainly suits businesses that will retain earnings or attract outside investors.
S-corporation status is the more common alternative and is elected on Form 2553. Your business remains a passthrough, but you become an employee of it, paying yourself a salary subject to normal payroll tax withholding. Remaining profit passes through as a distribution that is not subject to self-employment tax. The IRS requires that salary to be “reasonable” for the work you actually do, judged against comparable pay, your training and experience, hours devoted, and duties performed.18Internal Revenue Service. FS-2008-25 – Wage Compensation for S Corporation Officers Setting salary artificially low to dodge payroll tax is a frequent audit target; reclassified distributions come with back payroll taxes and penalties.
The S-corp math works when profit sits well above a reasonable salary. If a reasonable salary is $80,000 and the LLC nets $95,000, the savings on $15,000 of distributions won’t cover payroll costs and added complexity. At $200,000 in net profit with the same $80,000 salary, avoiding self-employment tax on $120,000 can save well over $18,000 a year. Run the numbers before you elect, because Schedule C simplicity and no-payroll administration are what you’re giving up.
Where the LLC Is Not Disregarded
The disregarded label applies only to income tax. For employment and excise tax purposes, the IRS treats your single-member LLC as a separate entity. If you have employees, the LLC must obtain its own EIN, file employment tax returns under the LLC’s name, and handle payroll tax deposits itself.19Internal Revenue Service. Single Member Limited Liability Companies The same is true for federal excise taxes on activities like fuel, heavy highway vehicles, wagering, and certain manufacturing, reported under the LLC’s name on Form 720, Form 2290, and other applicable forms.
If you have no employees and no excise tax exposure, you don’t strictly need an EIN and can use your Social Security number for federal tax purposes. Banks and some states require one anyway, and the application is free.
State Taxes Are Separate
Federal rules don’t cover your state obligations. Most states with an income tax follow the federal disregarded treatment, so business profit flows to your state personal return the same way. A handful require a separate entity-level informational filing even while respecting the federal classification. Many states also charge an annual fee, franchise tax, or registration renewal to keep the LLC in good standing, and falling behind on those can lead to administrative dissolution and loss of liability protection. Check your secretary of state for amounts and due dates, since they rarely line up with federal tax deadlines.