How to Calculate Tax Percent

If you run a business, calculating your tax rate is part of your daily grind. How much of your receipts go to the state as sales tax? How much of your company's income goes to state and federal taxes? Unlike for your employees, nobody is taking out withholding for you, so you have to calculate tax percentages yourself.


Each tax your company pays involves a different tax-percentage calculation method. For federal income tax, for example, you subtract business expenses from business revenue to determine your pretax income. Your tax percentage depends on your income bracket and your business structure.

Tax Rules for Business

Individual taxpayers may be able to figure out their tax by plugging their income and expenses into a tax percentage calculator. It's more complicated for businesses because they're often obligated to calculate and pay a wider range of taxes:

  • Income tax. Sole proprietors and partners pay tax on business income as if it were personal income. If your business operates as a C corporation, then it pays its own income tax. You will generally pay taxes at both the federal and state level. Using a state tax calculator can help you arrive at the total due.
  • Sales tax. All but five states levy a sales tax, although some products may be exempt. Some states also tax the sale of specific services as an added revenue source. 
  • Property tax. If your business owns the land, you're probably paying tax on it. Some states charge a tax on other types of property, such as cars and boats.
  • Self-employment tax. If you're self-employed, you have to pay Social Security and Medicare tax as well as income tax. You pay both the employee and employer's share of the tax, currently for a total of around 15 percent.
  • Employment taxes. While you don't pay your employees' state and federal income taxes for them, you do have to calculate the tax and withhold it from their paychecks. 

As if that wasn't enough, you have to make regular payments around the year, rather than waiting until April 15. Estimated taxes are due four times a year: April, June, September and January.

Income Tax Percentages

Even for individuals, figuring income tax takes more than plugging a salary into a tax percentage calculator. The tax varies depending on your marital status, the deductions you can claim, and whether you have any tax credits. If you're in business, you have added considerations.

  • What's your business structure? Sole proprietorships and partnerships treat business income as personal income. That's also the case if you own an S corporation. C corporations pay income tax; as of late 2019, it's a flat 21 percent.
  • What's your tax bracket? If you're not a C corporation, you calculate tax percentage much like an individual. Based on the type of return - single, joint, married but filing separately - and your adjusted gross income, you find your tax bracket. That sets your percentage. If your income is, say, $90,000–$100,000, you pay a flat $14,382.50 as of late 2019, plus 24 percent of income above $84,200. 

As a business owner, you can lower your income with various deductions. If you use a home office, you may be able to write off part of your housing costs. You can also claim half your self-employment tax as a write-off, and possibly the cost of your health insurance.

Sales Tax Percentages

Calculating the sales tax percentage on products or services you sell is often more complicated. On top of the state rate, individual counties, cities and special tax districts may all impose a sales tax. Even though you make one payment for each tax period combining all the percent taxes, figuring out exactly which rate you pay can be confusing.

Your state's sales tax website should have a guide indicating what your total tax percentage is in a given location. Some states, such as North Carolina, have an online tax percentage calculator that can save you a little bit of number crunching.