LLC Taxes 2025 — How Single-Member and Multi-Member LLCs Are Taxed
2025 IRS data — updated for current tax year
Default LLC Tax Treatment
The IRS ignores single-member LLCs for tax purposes — all income and expenses flow to your Schedule C. Every dollar of profit faces self-employment tax at 15.3% (on 92.35% of net earnings) plus ordinary income tax. Multi-member LLCs are taxed as partnerships by default, filing Form 1065.
S-Corp Election to Reduce SE Tax
An LLC can elect S-corp tax treatment (Form 2553). The owner pays themselves a "reasonable salary" — subject to FICA at 15.3% combined — then takes remaining profits as distributions not subject to SE tax. On $150,000 net profit with a $90,000 reasonable salary, the S-corp saves roughly $9,180 in SE tax versus no election.
Frequently Asked Questions
When does an S-corp election make sense for my LLC?
Generally when net profit consistently exceeds $40,000–$50,000 after paying yourself a market-rate salary. Below that, S-corp setup costs (payroll, extra tax filings) often exceed the savings.
Can my LLC deduct health insurance premiums?
Yes — sole proprietors and S-corp shareholders owning more than 2% can deduct health insurance premiums as an above-the-line deduction, reducing AGI.