The amount of money a small business can make before paying taxes depends on several factors, including its legal structure, business expenses, deductions, and applicable tax laws.

Here’s a general overview…

1. Taxable Income Threshold
   • For most small businesses, taxable income is calculated as the business’s gross income minus allowable business expenses and deductions. The threshold for paying taxes on this income varies depending on the business’s legal structure…
     • Sole Proprietorship – In a sole proprietorship, the business owner reports business income and expenses on their tax return (Form 1040). As of 2022, single filers with taxable income up to $9,950 and married individuals filing jointly with taxable income up to $19,900 are typically not required to pay federal income tax.
     • LLCs, Partnerships, and S Corporations – These business entities are pass-through entities for tax purposes, meaning that business profits are passed through to the owners’ tax returns. The threshold for paying taxes depends on the individual tax situation of each owner.
2. Tax Deductions and Credits
   • Small businesses can reduce their taxable income by deducting eligible business expenses such as operating costs, salaries, rent, utilities, supplies, and marketing expenses. Also, they may be eligible for tax credits, such as the Small Business Health Care Tax Credit or the Research and Development Tax Credit, which can further reduce their tax liability.
3. State and Local Taxes
   • In addition to federal income tax, small businesses may be subject to state and local taxes, which vary by jurisdiction. State income tax thresholds and deductions may differ from federal tax rules, so it’s necessary to consult with a tax professional familiar with the laws in your state.
4. Estimated Tax Payments
   • Depending on the business’s income level, it may be required to make quarterly estimated tax payments to the IRS and state tax authorities throughout the year. Failure to make these payments or underestimating tax liabilities can result in penalties and interest charges.
5. Tax Planning and Compliance
   • Small businesses should engage in tax planning strategies to optimize their tax situation, minimize tax liability, and ensure compliance with tax laws. Consulting with a qualified tax advisor or accountant can help businesses understand their tax obligations, maximize deductions, and plan for tax-efficient growth.

The amount of money a small business can make before paying taxes varies based on multiple factors, and business owners must understand their tax responsibilities and seek professional guidance to navigate tax laws effectively.