Taxes amount
Will my personal income tax be combined with my business tax? I am in New York and run a business in Alabama. How much tax do I need to pay for my business? Will it be connected to my personal income tax? What will the calculation for my business tax be if it is not included?
Quick Answer:
Whether your business and personal taxes are combined depends on your business structure (Entity Type).
**Pass-Through Entities (Sole Proprietorship, LLC, S-Corp, Partnership):**
Your business income "passes through" to you. It is reported on your personal returns (Form 1040 and AL Form 40NR) and taxed at your individual income tax rates. They are combined.
**C-Corporations:**
The business is a separate legal entity. It pays its own taxes at the corporate rate (21% Federal; 6.5% Alabama). You only pay personal tax on dividends or salary received.
**Alabama Nexus:**
Because you operate in Alabama, you must file an Alabama non-resident return. Alabama’s individual income tax rates range from 2% to 5%. You will likely receive a credit on your New York return for taxes paid to Alabama to prevent double taxation.
**Calculations:**
If a pass-through, the tax is: *(Business Gross Income - Allowable Expenses) × Your Marginal Tax Bracket Rate.*
If a C-Corp, the tax is: *(Taxable Income) × 6.5% (AL) and 21% (Federal).*
I am unsure of your specific liability amount because it depends entirely on your net profit and total household income.
Note: This answer is provided for convenience only. It is important that you speak to a CPA about your individual tax situation.
