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What are LLC taxes?

Nicolas StrautBy Nicolas StrautPublished 8 min read

Key takeaways

  • LLC taxes follow 1 of 4 federal classifications: the IRS taxes a one-owner LLC as a sole proprietorship and an LLC with two or more owners as a partnership, unless the LLC files to be taxed as a corporation.1
  • To work out your LLC taxes, start with how many owners the LLC has and whether it filed an election: owners of a default LLC pay income tax and 15.3% self-employment tax on their share of profit, whether or not they took the money out.
  • LLC taxes for a multi-member LLC start with Form 1065, due March 15, 2027 for tax year 2026, a month before your own return, so run your share of profit through the Solvent self-employment tax calculator once the K-1 arrives.
In this article

LLC taxes are the federal and state taxes an LLC and its owners pay, and the IRS decides which ones by classifying the LLC. Most LLCs pay no federal income tax themselves. The profit passes to the owners, who report it on their own returns. This guide covers the four classifications, what each one owes, which return it files, and what changed for 2026.

How are LLCs taxed?

LLCs are taxed under one of four IRS classifications, set by how many owners the LLC has and whether it filed an election: disregarded entity, partnership, S corporation, or C corporation. An LLC is created under state law, and its federal tax treatment comes from the classification, not from the LLC itself.

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ClassificationWho gets itFederal returnWho pays the income taxTax on the owner's earnings
Disregarded entity (taxed like a sole proprietorship)One owner, by defaultSchedule C on the owner's Form 1040The owner, at their own bracket rates (10% to 37%)15.3% self-employment tax on 92.35% of profit
PartnershipTwo or more owners, by defaultForm 1065, with a Schedule K-1 to each memberEach member, on their shareSelf-employment tax on each member's share and guaranteed payments
S corporationAny LLC that files Form 2553 and qualifiesForm 1120-S, with a K-1 to each ownerEach owner, on their sharePayroll tax on the owner's salary only
C corporationAny LLC that files Form 8832Form 1120The LLC, at a flat 21%Payroll tax on salary; dividends taxed again on the owner's return

The first two rows cover most freelancers and small partnerships. The S corp row is a separate decision, and S corp vs LLC covers when it pays off.

What taxes does an LLC pay?

An LLC pays four kinds of tax, depending on its classification and whether it has employees: federal income tax, self-employment tax, payroll taxes, and state taxes or fees.

Federal income tax

Federal income tax on LLC profit is paid by the owners in a default LLC or an S corp. The LLC itself pays only if it elected to be taxed as a C corporation. Owners pay at their own 2026 bracket rates after the standard deduction, which is $16,100 for a single filer. The QBI deduction of up to 20% applies to profit from a default LLC or an S corp.

Self-employment tax

Self-employment tax applies to the owner of a single-member LLC and to members of a multi-member LLC on their share of profit, at 15.3% on 92.35% of net earnings once those reach $400.2 Social Security's 12.4% stops at the 2026 wage base of $184,500, and Medicare's 2.9% has no cap. The self-employment tax guide covers how it is calculated.

The IRS states it directly for partnership LLCs: members "pay self-employment tax on their share of partnership earnings."3

Payroll taxes, if the LLC has employees

Payroll taxes apply once the LLC has employees: it withholds and pays Social Security, Medicare, and federal unemployment tax on their wages. A single-member LLC is disregarded for income tax but counts as a separate entity for employment and certain excise taxes, so it reports payroll under its own EIN. LLC vs sole proprietorship covers when the LLC needs an EIN.

State LLC taxes and fees

State LLC taxes and fees depend on where the LLC is formed or does business, and a few states charge an annual LLC tax whether or not the LLC made money. California charges every LLC an annual tax, and New York charges an annual filing fee. The how much does an LLC cost guide lists the fees state by state.

Who decides how your LLC is taxed?

The IRS decides how your LLC is taxed by default, based on how many owners it has, and the LLC can change that by filing an election.

How the IRS sets your LLC's default classification

The IRS sets your LLC's default classification by counting its owners: one owner makes it a disregarded entity, and two or more make it a partnership. In the IRS's words, a domestic LLC with at least two members "is classified as a partnership for federal income tax purposes unless it files Form 8832 and affirmatively elects to be treated as a corporation."

How to change your LLC's tax classification

To change your LLC's tax classification, you file Form 8832 to be taxed as a C corporation or Form 2553 to be taxed as an S corporation. A Form 8832 election cannot take effect more than 75 days before you file it or more than 12 months after, so pick the start date before you send it.

An LLC electing S corp status files only Form 2553, not Form 8832 as well. The S corp vs LLC guide covers the Form 2553 deadline and steps.

4 differences between single-member and multi-member LLC taxes

The 4 differences between single-member and multi-member LLC taxes are the return you file, when it is due, how profit reaches your Form 1040, and how you pay yourself.4

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DifferenceSingle-member LLC (default)Multi-member LLC (default)
Federal returnNone for the LLC; Schedule C on your Form 1040Form 1065 for the LLC, plus your own Form 1040
Due date for tax year 2026April 15, 2027, with your Form 1040Form 1065 by March 15, 2027; your Form 1040 by April 15, 2027
How profit reaches youDirectly, as your Schedule C profitThrough a Schedule K-1 showing your share, given to each member by the Form 1065 due date
How you pay yourselfOwner's draws, not deductibleGuaranteed payments for services, deductible to the LLC and taxable to you, plus distributions

A late Form 1065 costs $255 for each month or part of a month, up to 12 months, multiplied by the number of members, under the 2025 instructions. The penalty applies even when the LLC owes no tax itself, so file on time or request an extension.

You are taxed on your share, not on what you took out. A member owes tax on their K-1 share even if the LLC kept the cash, so set money aside for it either way.

What changed for LLC taxes in 2026?

Four things changed for LLC taxes in 2026, and none of them is a new LLC rule: they are the yearly figures and two law changes that reach LLC owners through their own returns.

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Item20252026Source
Social Security wage base$176,100$184,500SSA
Standard deduction, single$15,750$16,100IRS Rev. Proc. 2025-32
QBI deduction20%, set to expire after 202520%, made permanent; phase-in starts at $201,750 single, $403,500 jointOBBBA; Rev. Proc. 2025-32
Form 1099-NEC threshold$600$2,000Instructions for Forms 1099-MISC and 1099-NEC

With the 1099-NEC threshold at $2,000, clients send fewer 1099s to an LLC. Your Schedule C or the LLC's Form 1065 still has to include all of its income, so total your invoices or deposits instead of your 1099s.

How to file LLC taxes in 4 steps

You file LLC taxes in 4 steps, and which forms you use depends on the classification you confirm in step 1.

Step 1: Confirm your LLC's tax classification

Confirm your LLC's tax classification by checking how many members it had for the year and whether the IRS accepted a Form 8832 or Form 2553. If you never filed either form, the default rules above apply.

Step 2: File the LLC's own return, if it has one

File the LLC's own return if it has one: Form 1065 for a partnership LLC by March 15, Form 1120-S for an S corp, and Form 1120 for a C corp. A single-member LLC with no election files no separate federal income tax return.

Step 3: Report your share on your Form 1040

Report your share on your Form 1040: Schedule C for a single-member LLC, or the amounts on your Schedule K-1 for a multi-member LLC, plus Schedule SE for self-employment tax. The partner's instructions for Schedule K-1 say where each amount goes on your return.

Step 4: Pay estimated tax on this year's profit

Pay estimated tax on this year's profit in four payments if you expect to owe $1,000 or more after withholding, because no one withholds tax from LLC profit.

How LLC taxes work if spouses own the LLC or it made no money

LLC taxes work differently in two common cases: an LLC owned by a married couple, and an LLC that made no money during the year.

If you and your spouse own the LLC

If you and your spouse own the LLC, the IRS treats it as a two-member partnership that files Form 1065, even if you file a joint return. The qualified joint venture election, which lets spouses each file a Schedule C, covers only a business "not in the name of a state law entity (including a limited partnership or limited liability company)."5

Spouses who own the LLC as community property in a community property state can treat it as a disregarded entity instead, under Rev. Proc. 2002-69. Ask a tax professional before you rely on it.

If your LLC made no money

If your LLC made no money, what you file depends on its classification and whether it had any expenses. A partnership LLC files Form 1065 "unless it neither receives income nor incurs any expenditures treated as deductions or credits."

A single-member LLC with expenses and no income still reports the loss on Schedule C. State annual taxes and fees apply either way.

How much tax does an LLC owner pay?

An LLC owner pays self-employment tax and income tax on their share of profit, so two owners splitting the same profit each pay on half.

On $80,000 of profit in a single-member LLC, that is $80,000 × 92.35% × 15.3%, or about $11,304 of self-employment tax. Split the same $80,000 evenly in a two-member LLC, and each member pays $40,000 × 92.35% × 15.3%, or about $5,652, plus income tax on their own return.

Solvent self-employment tax calculator

Calculate your self-employment tax

Open the Solvent Self-Employment Tax Calculator

How to estimate quarterly taxes on your LLC profit

To estimate quarterly taxes on your LLC profit, project your share of the year's profit and pay a quarter of the tax each due date, so you'll owe less when you file. The Solvent quarterly tax estimator turns your year-to-date share into a payment for each quarter.

Frequently asked questions about LLC taxes

Do you pay more taxes if you own an LLC?

No, you do not pay more taxes because you own an LLC, since a default LLC is taxed the same way as a sole proprietorship or partnership. What can raise your costs are state annual taxes and fees, and a C corporation election, which taxes profit at the entity level and again as dividends.

What can an LLC write off?

An LLC can write off ordinary and necessary business expenses, such as software, supplies, advertising, contract labor, business insurance, rent, and business use of a car or home. A single-member LLC deducts them on Schedule C, and a multi-member LLC deducts them on Form 1065 before profit is split among members. The 1099 deductions list covers each category.

How can an LLC avoid paying high taxes?

An LLC lowers its taxes through the same tools as any business: claiming every deductible expense, contributing to a retirement plan such as a SEP IRA or Solo 401(k), and claiming the QBI deduction. Some owners also elect S corp treatment, which reduces payroll tax once profit is high enough to cover the extra costs.

How to avoid double taxation with an LLC?

You avoid double taxation with an LLC by keeping its default classification or electing S corp treatment, because in both cases profit is taxed once, on the owners' returns. Double taxation applies only if the LLC elects to be taxed as a C corporation, which pays 21% on profit before dividends are taxed again.

What are common LLC mistakes to avoid?

Common LLC mistakes to avoid at tax time include assuming profit left in the LLC is untaxed, missing the March 15 Form 1065 deadline on a multi-member LLC, mixing business and personal money in one account, and skipping estimated payments because no one withholds tax from LLC profit.

About the author

Nicolas Straut

Nicolas Straut

Personal and business finance writer, former Forbes contributor

Nicolas Straut writes about self-employment and quarterly tax, LLC formation and costs, and tax software for Solvent. He has written about money for about ten years, including for the fintech companies NorthOne and Fundera. He files his own taxes as a freelancer. He isn't a CPA or an enrolled agent (EA).

More articles by Nicolas Straut →
This page describes federal tax treatment of US LLCs for tax year 2026. State taxes and fees vary and are not covered in full here. Solvent provides educational estimates, not tax advice. Confirm your specific situation with a qualified tax professional.

Sources

  1. https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc
  2. https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes · https://www.ssa.gov/oact/cola/cbb.html
  3. https://www.irs.gov/businesses/small-businesses-self-employed/llc-filing-as-a-corporation-or-partnership
  4. https://www.irs.gov/instructions/i1065 · https://www.irs.gov/instructions/i1120
  5. https://www.irs.gov/businesses/small-businesses-self-employed/election-for-married-couples-unincorporated-businesses