Federal effective tax rates average 20% for small businesses
A new report out from the Small Business Administration reveals the effective tax rates for small businesses when it comes to federal income taxes. Average rates range from 13.3% for small sole proprietorships to 27% for small S corporations. And remember, the effective tax rate is the actual amount of taxes paid by a firm as a percent of its net income. This is important because these rates reflect the statutory benefits aimed at lowering a business' tax liability. In essence, the 13-27% is lower than what the rate would otherwise be without legislative deductions, exemptions, credits, et al.
rkers and earn less than $3 million or less in annual gross income.