How much percentage does Federal and State take from business income?
Im starting a business and starting to realize this: is the Federal gov and State (virginia) taking 40-50% of my profits? For every 100 dollars I have to give up $50 in taxes??
Public Comments
- It depends how much you make. And what state you live in. If you're self-employed, then almost 15% goes to self-employment tax (which is social security and medicare). The state tax varies from state to state...but generally 0 to 8%. Federal is progressive... An idea of where the division are is here: http://www.suburbancomputer.com/tips_tax.htm It's possible if you earn $50,000, the total from all tax sources could approach 50%, depending on where you live. Social secuirty phases out, though, and drops off completely when you make more than $100,000 or so...so in effect, your total tax rate drops if you make over 100K.
- Dear Hock: 40-50% is possible, but I have seen most start ups do not generate a profit the first couple years. This allows you to write off some losses until you get the business going. Get some tax help as this is an area where planning is very important and your choice on depreciation is critical. As a business owner you have some goodies that regular "working people" do not enjoy. Get some advice. This advice was prepared based on our understanding of the tax law in effect at the time it was written and it applies to the facts that you provided. Click on my profile to read more. Errol Quinn Enrolled Agent Master Tax Advisor
