Question 1

How does the Profit & Tax Calculator work?

Accepted Answer

Enter your total revenue and total expenses for the year. The calculator computes your net income (revenue minus expenses) and estimates your tax using current brackets for your selected region (US or Canada).

Question 2

Is the tax estimate accurate?

Accepted Answer

It's a rough estimate. The calculator uses real federal tax brackets but applies simplified state/provincial estimates. It does not account for all deductions, credits, or contributions (RRSP, 401k, HSA, etc.). Use it for quick planning — consult a tax professional for filing.

Question 3

What is the effective tax rate shown?

Accepted Answer

The effective tax rate is your total estimated tax divided by your net income, expressed as a percentage. It shows what percentage of your income goes to tax overall, unlike the marginal rate which applies only to your highest bracket.

Question 4

Does this include self-employment tax?

Accepted Answer

For US users: Yes, the federal tax estimate includes the 15.3% self-employment tax (Social Security + Medicare). For Canadian users: CPP contributions are not currently included (self-employed pay ~11.9% on net income between ~$3,500 and ~$68,500).

Question 5

What expenses can I deduct as a sole proprietor?

Accepted Answer

Common deductions include home office costs, vehicle expenses, professional fees, advertising, insurance, supplies, and meals (50%). Use Schedule C categories (US) or T2125 lines (Canada). The Expense Logger maps expenses to the appropriate tax form lines.