Disregarded Entity LLC Where the profit goes on your return
With one owner and no election, the LLC's profit goes on your own return. Here's which schedule, what self-employment tax adds, and when an S corp election helps.
The kind of work picks the schedule
A business or service you run goes on Schedule C. A rental goes on Schedule E. A farm goes on Schedule F. The type of activity picks the schedule, whatever name is on the bank account.
If your LLC is owned by a corporation or a partnership, its profit goes on that company's return as a division. A corporate owner reports it on the corporate return, and the LLC files nothing separate for income tax.
If no one ever filed Form 8832 or Form 2553, your personal return is the LLC's income tax return. We look at last year's return with you and point to the schedule that carries the LLC.
A rental in the LLC stays a rental
If the LLC only owns a rental, the rent goes on Schedule E, the same as if you owned the property directly. Rent, repairs and depreciation all stay together there.
A repair keeps the property working the way it did. An improvement makes it better or longer-lasting, and you write it off over years through depreciation. We sort those from your invoices.
If the property was your home before it became a rental, that history matters for depreciation. Tell us when it changed use, and we'll set it up correctly.
Self-employment tax on a disregarded entity LLC
If the LLC runs a trade or business, the profit on Schedule C also carries self-employment tax. That is how you pay Social Security and Medicare on your own earnings: 15.3% on 92.35% of the profit. The Social Security part stops at the wage base, which is $176,100 for 2025. It comes on top of income tax.
You can deduct the employer half of that tax when you figure your income. Rental income on Schedule E is usually outside self-employment tax.
An S corp election can lower self-employment tax once profit is high enough. After the IRS accepts Form 2553, an owner who works in the business takes a reasonable salary through payroll, and that salary carries Social Security and Medicare. Whatever profit is left after that salary can be paid out as a distribution, which carries no self-employment tax. We run that comparison with your numbers first.
Owner draws and profit
Money you move from the LLC's account to yours is usually an owner draw. A draw does not lower your profit, and it is taxed as part of that profit, not as wages. The profit is what the business earned. The draw is where the cash went.
Keeping the books current each month keeps the draws and the profit apart, so the number on your Schedule C is one you understand before tax time. It also tells you what to set aside for your quarterly payments.
Losses and records
If the LLC loses money, the loss goes on your return as well. It can offset your other income, within the IRS limits on at-risk amounts, passive activities and large business losses. We check which limits apply to you.
Keep receipts, invoices, bank and card statements, and a mileage log if you drive for the business. Books matched to the bank each month make your Schedule C easy to prepare and easy to explain if the IRS ever asks.
Questions owners ask about this tax
Does my LLC file its own federal income tax return?
With one owner and no election, no. The profit goes on your return. The LLC still files its own payroll returns if it has employees.
My software opened a Form 1065 or Form 1120 for the LLC. Is that right?
Only if an election was filed or the LLC has more than one owner. Bring both returns to the call, and we'll check which one matches how the LLC is actually classified before anything is filed.
Which papers help me get started?
Last year's personal return and the company name are enough to start. If you have the IRS letter that assigned the LLC's EIN, bring that too.
Get help with your return
Tell us which schedule the LLC went on last year, if you know. On a free 30-minute call, we'll match your LLC to the right schedule.
You will be talking to the Steven Palmieri practice.