Small Business Income Tax Calculator

Individual Income Tax

A personal income tax is a tax imposed on an individual’s wages, salaries, investments, or other forms of income.

Forty-two states impose a tax on the income of individuals, sometimes referred to as personal income tax. All states that impose an individual income tax allow most business deductions.

However, some states have reciprocity agreements with one or more other states that allow income earned in another state to be taxed in the earner’s state of residence.

The U.S. imposes a progressive income tax where rates increase with income. The Internal Service Revenue (IRS) offers a series of deductions, based on mortgage interest, a percentage of medical and dental bills, education expenditures, and many other expenditures.

Business Income Tax

The earnings of businesses are also subject to income taxes. Small businesses, self-employed contractors, partnerships, and corporations must pay income tax depending on their earnings.

However, C corporations pay income tax at the corporate rate. These entities report their revenue and then subtract capital and operating expenses depending on their business structures. All businesses have to file an annual income tax return. 

State Income Tax

State income taxation is a tax paid on the income earned in a particular state, which varies widely from state to state. It is similar to a federal income tax, but state income tax generally funds state budgets rather than the federal government.

State income tax rates vary widely from state to state. Such citizens are allowed a credit for taxes paid to different states. Most states tax the income of nonresidents earned within the state. 

• States With Progressive Income Taxes

Each state sets their own tax rates and tax brackets, so if you live in one of the 32 states with a progressive tax structure, pay attention to which tax bracket and tax rate you fall into for your state.

If you live in Hawaii, you could fall into one of 12 different tax brackets with tax rates between 1.4% and 11%. But Louisiana has just three tax brackets with tax rates between 2% and 6%. Think wisely while migrating from one state to another.

• States With Flat Income Taxes

There are nine states that keep things simple. Really simple. They have a flat tax rate­. That means it doesn’t matter how much or how little you earn—you’re taxed at the same rate as everyone else.

Flat Income Tax Example:

Let’s take a look at the Kentucky , which has a flat 5% tax on income. If you made $50,000 last year and your colleague made $500,000, the state of Kentucky will tax both of you at 5%.

Here are the nine states that have a flat income tax structure:

1. Colorado
2. Illinois
3. Indiana
4. Kentucky
5. Massachusetts
6. Michigan
7. North Carolina
8. Pennsylvania
9. Utah

• States With No Income Tax

The lack of an income tax is not to say that the citizens of these states don’t pay any tax to the state—residents in each of these states have to pay a variety of other taxes. Then these are eight states that do not levy any income taxes at all! The following are the eight states :

1. Nevada
2. Washington
3. South Dakota
4. Florida
5. Alaska
6. Texas
7. Wyoming
8. Tennessee
9. New Hampshire

Note: New Hampshire doesn’t tax regular income but does tax any money you make from interest and dividends from your investments.

How to calculate Income Tax

Which tax bracket (income range) you’re in determines your tax rate (the percentages of your income that you pay in taxes). The tax rates and brackets for the 2023 tax year are listed below.