Quick Tax Facts
For Business

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This page contains tax amounts and percentages commonly used by business owners and self-employed individuals.  

Note:  The IRS changed the 2011 rate for the second half of 2011.

IRS Standard Business Mileage Rate:

The IRS Standard Business Mileage Rate is the maximum rate to be used to reimburse employees or business owners for business use of personally owned automobiles.  The standard mileage rate is a simpler alternative to using actual costs.   

First Year Equipment Write-Off (Section 179)

Business equipment expected to last more than one year normally has to be depreciated over several years as mandated by IRS regulations.  Section 179 allows you to write-off the cost of qualified equipment entirely in the year of purchase up to the specified limit. Generally does not apply to vehicles or rental real estate.  If total equipment purchases are in the phase-out ranges, the first year deduction allowance is reduced by one dollar for each dollar total equipment purchases exceed the beginning phase-out amount.     

Maximum Contributions to Retirement Plans:

These are the maximum amounts that employees participating in employer-sponsored retirement plans can choose to add to their retirement savings by reducing their cash salaries.  Employees age 50 and over can add even larger amounts to 401(k) and SIMPLE IRA plans.

Maximum Wages (& Self-Employment Income) Subject To FICA Tax:

These are the maximum wages and self-employment income amounts which are subject to the full FICA/Medicare tax.  After these amounts are exceeded during a calendar year, additional income is only subject to Medicare tax. (1.45% for employees & 2.9% for self-employed individuals) 

Maximum Compensation For Retirement Plans:

Many employer-sponsored retirement plans contribute a percentage of each eligible employee's gross compensation into the plan.    The Internal Revenue Code sets an upper dollar limit on the amount of gross compensation that can be taken into account when calculating an employee's retirement plan contribution. (This rule applies to employer-paid plan contributions.)  As an example, ABC company has a profit-sharing plan and has decided to contribute 15% of compensation to the plan for calendar year 2012.  Employee J. Smith had $300,000 in compensation for the year and will receive an employer-paid profit-sharing contribution  of $37,500.  ($250,000 x 15%) The compensation in excess of $250,000 for 2012 is ignored for the retirement plan contribution.

* Additional "catch-up" contributions for plan participants aged 50 or over are $5,000 for 2012 and 2011.

Qualified Transportation Benefits:

Employees can set aside a portion of their wages to pay for qualified transportation benefits on a pre-tax basis.  Employees save income, social security and Medicare taxes on the pre-tax transportation costs and the employer saves the matching employer-paid payroll taxes.  

Federal Corporation Income Tax Rate Schedule:

This is the rate schedule for "C" corporations only.   Income tax on S corporation earnings are paid at the individual tax rates of the shareholders.  Qualified personal service corporations pay a 35% rate of tax at all levels of income.  Qualified personal service corporations include most incorporated professionals and consultants.