11/08/2023
How Much Should a Small Business Set Aside for Taxes?
The amount that a small business should set aside for taxes will depend on a variety of factors, such as the type of business, its location, revenue, and expenses. In general, it is recommended that small businesses set aside 25-30% of their revenue for federal, state, and local taxes.
Here are some steps you can take to estimate the amount of taxes you may owe:
Determine your estimated annual revenue: This is the total amount of money your business expects to earn in a year.
Estimate your deductible expenses: Deductible expenses are the expenses that you can subtract from your revenue to determine your taxable income. Common deductible expenses include rent, utilities, supplies, and employee salaries.
Calculate your taxable income: Subtract your deductible expenses from your estimated annual revenue to determine your taxable income.
Estimate your tax liability: Once you have your taxable income, you can use tax tables or tax software to estimate your federal, state, and local tax liability.
Set aside a percentage of your revenue: Based on your estimated tax liability, set aside a percentage of your revenue each month or quarter to cover your taxes. As mentioned earlier, setting aside 25-30% of your revenue is a good starting point.
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