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Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Experience:  3+ decades of varied tax industry exp. Tax Biz owner
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I am looking to start my own business as a sole-proprietor

Customer Question

I am looking to start my own business as a sole-proprietor (no employees), as an LLC with expected income at $240,000 next year. After IL state taxes, federal axes, social security and medicare, what can I expect as take home pay?
thank you
Submitted: 1 year ago.
Category: Tax
Expert:  Tax.appeal.168 replied 1 year ago.

A sole proprietor and an LLC are two different types of business entities. Of the two, you can be a sole proprietor, or a single member LLC.

In addition to federal and state taxes, self employment tax is 15.3%. However, as a self employed person, 1/2 of that is credited back to you. Not knowing what your deductions would be, it is hard to give you a ballpark figure as to what your take home will be. However, if yo want a starting point, we can start with the federal tax bracket that the $240,000 places you in. Depending upon your filing status, if filing single or married filing jointly, you will be in the 33% tax bracket. If married filing separately, the 35% tax bracket.

You can refer to the following webpage for the tax brackets:

http://www.forbes.com/sites/kellyphillipserb/2014/10/30/irs-announces-2015-tax-brackets-standard-deduction-amounts-and-more/

Tax rate for the state of Illinois is 3.75%

Refer to the following webpage:

http://www.revenue.state.il.us/TaxRates/Income.htm

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Expert:  Tax.appeal.168 replied 1 year ago.

You may wish to use the federal calculator at the following link.

https://www.calcxml.com/calculators/federal-income-tax-calculator

33% tax:

$79,200

35% tax:

$84,000

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3.75% state t rate is $9,000

Self employment tax (15.3%):

$36,720/2 = $18,360

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Keep in mind that your filing status, number of dependents, exemptions and deductions have not been accounted for.

Expert:  Tax.appeal.168 replied 1 year ago.

My apologies, the previous amounts provided for federal tax are incorrect.

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33% tax bracket (single) -

Tax is $46,075.25 + 33% of the amount over $189,300

$50,700 is the amount that is taxed at 33% (not the entire $240,000).

$50,700 x 33% =$16,731

$46,075.25 + $16,731 = $62,806.25 (federal tax)

Note that if you are filing married filing jointly, though the tax bracket percentage is the same, the base tax amount is different.

35% tax bracket (if married filing separately):

$55,662 + 35% of amount over $205,750

$34,250 is the amount that is taxed at 35% = $11,987.50

$55,662 + $11,987.50 = $67,649.50 (federal tax)

You can refer to the following webpage for the tax brackets:

http://www.forbes.com/sites/kellyphillipserb/2014/10/30/irs-announces-2015-tax-brackets-standard-deduction-amounts-and-more/