The small business tax guide covers self-employment taxes, quarterly payments, deductions, and entity structures — everything a freelancer, sole proprietor, or LLC owner needs to avoid surprises at tax time.
How to Handle Taxes as a Small Business Owner
The small business tax guide gives freelancers and small business owners a clear picture of what they owe and how to reduce it legally.
The 30% Rule for Tax Savings
A simple approach: set aside 25-30% of every payment you receive into a separate savings account. This covers self-employment tax (15.3%) plus federal income tax (at your marginal rate) plus state taxes. When quarterly payments are due, the money is ready. Underpaying quarterly taxes triggers penalties — it's better to slightly overpay and get a refund.
Track Every Business Expense
Every legitimate business expense reduces your taxable income dollar-for-dollar. On $80,000 self-employment income, $15,000 in deductions drops your taxable SE income to $65,000 — saving $2,295 in SE tax alone (at 15.3%). Common deductible expenses: software subscriptions, home office, business phone, professional development, equipment, and health insurance premiums (self-employed can deduct 100% of premiums).
FAQ
Is this small business tax guide free?
Yes, completely free with no signup required.
How much self-employment tax do I owe?
Self-employment tax is 15.3% on net self-employment income up to $176,100 (2026), then 2.9% above that. It covers both the employer and employee share of Social Security and Medicare. You can deduct 50% of SE tax from your income tax.
When are quarterly estimated taxes due?
Quarterly estimated tax due dates are: April 15 (Q1), June 16 (Q2), September 15 (Q3), and January 15 (Q4, for prior year). If you expect to owe $1,000 or more in federal taxes, you're generally required to pay quarterly or face underpayment penalties.
What can I deduct as a home office?
If you use part of your home exclusively and regularly for business, you can deduct either: (1) Simplified method — $5 per square foot up to 300 sq ft ($1,500 max), or (2) Actual expenses — the percentage of your home used for business multiplied by rent/mortgage interest, utilities, insurance. The actual method is usually higher but requires more recordkeeping.
Should I form an LLC or S-corp to save on taxes?
A single-member LLC is taxed as a sole proprietor by default (same taxes, more legal protection). An S-corp election can save SE tax when your net profit exceeds $50,000 — you pay yourself a 'reasonable salary' (subject to payroll taxes) and take the rest as distributions (not subject to SE tax). S-corps add accounting complexity and cost $500-$2,000/year.
Can I deduct my car for business use?
Yes, two methods: (1) Mileage rate — $0.70/mile for 2025 business miles (multiply actual business miles by rate), or (2) Actual expenses — track gas, insurance, repairs, and deduct the business-use percentage. Keep a mileage log either way. Do NOT include commuting miles.