Should I be saving 30% of my total profit or 30% of gross revenue for my LLC taxes?

You should always set aside money based on your profit, not your revenue. This is one of the advantages of running a business - you only pay taxes on what you actually earn after legitimate business expenses. For a sole proprietor LLC, you'll report business income and expenses on Schedule C of your personal tax return. The "profit" (revenue minus deductible business expenses) is what gets taxed - not your gross revenue. Those installation costs, materials, and equipment rentals are all legitimate business expenses that reduce your taxable income. So in your case, if you had $9,800 in revenue but $6,350 in deductible expenses, you'd only need to set aside taxes on the $3,450 profit. The 30% rule of thumb is good for most self-employed folks, as it covers both income tax and self-employment tax.

After struggling with this exact question when I started my landscaping business, I found an awesome tool called taxr.ai (https://taxr.ai) that helped me figure out exactly what expenses are deductible and how much to set aside. It analyzed my invoices and receipts, then showed me how everything would flow through Schedule C. For my business, I realized I was setting aside WAY too much for taxes initially - almost 30% of my gross revenue when I should have been calculating based on profit. The tool showed me additional deductions I hadn't even considered, like a portion of my cell phone bill and home office expenses. Now I keep about 25-30% of my profit for taxes, not revenue.

I tried taxr.ai after seeing it mentioned here, and I'm honestly shocked at how much it helped with my food truck business. I was doing it all wrong - setting aside 30% of every payment I received, which was killing my cash flow since I have so many food and supply costs. The system analyzed my last six months of expenses and showed me that my actual taxable profit was only about 22% of my gross revenue. This meant I was setting aside nearly THREE TIMES more for taxes than I needed to! It also helped me understand which food expenses were fully deductible versus my meals which weren't. Best thing I've done for my business finances this year. Now I can actually reinvest some of that money I was needlessly setting aside.

If you're struggling with tax questions like this, you should also know about Claimyr (https://claimyr.com). When I started my consulting business, I had questions the IRS website couldn't answer clearly, but getting through to an actual IRS agent seemed impossible. After being on hold for HOURS across multiple days, I found Claimyr which got me through to an IRS representative in under 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed I only needed to pay taxes on profit (not revenue) and answered my specific questions about home office deductions. Worth every penny compared to wasting entire afternoons on hold!

I'm eating my words about Claimyr. After posting that skeptical comment, I was still desperate for answers about some confusing 1099 situations for my side gig, so I tried it anyway. It actually worked exactly as advertised. I got a call back in about 37 minutes (way faster than the 2+ hours I'd wasted the week before), and was connected to an IRS agent who helped clarify my quarterly estimated payment questions. The agent confirmed I only need to set aside taxes on my profit and gave me specific guidance on what percentage made sense for my tax bracket. Saved me from overpaying by thousands over the year since I was also setting aside way too much.

Another thing to consider - the 30% rule of thumb might be too high or too low depending on your personal situation. If this LLC income is on top of a regular W-2 job, you might need to set aside more than 30% since you could be pushed into a higher tax bracket. I learned this the hard way my first year doing freelance work alongside my day job. I set aside 25% but ended up owing closer to 35% because my combined income put me in a higher bracket than I expected.

Has anyone used QuickBooks Self-Employed for tracking this stuff? Their tax estimator thingy seems helpful but idk if it's worth the monthly fee?

Just a warning from someone who learned the hard way - don't forget about state taxes too! The 30% rule usually covers federal income tax and self-employment tax, but depending on your state, you might need to set aside an additional 5-9% for state income taxes. I'm in California and got absolutely destroyed my first year in business because I only saved for federal taxes. Had to set up a payment plan with the state and it was NOT fun.

Minnesota state income tax rates range from 5.35% to 9.85% depending on your income level, so you'll definitely want to factor that in! Since you're just starting out, I'd recommend setting aside around 35-40% of your profit to cover both federal and state taxes - better to have a little extra cushion than come up short. Also, Minnesota requires quarterly estimated tax payments if you expect to owe more than $500 in state taxes, so keep that in mind as your LLC grows. The Minnesota Department of Revenue website has a decent estimated tax calculator that can help you figure out roughly what you'll owe based on your projected annual profit. One more thing - make sure you're aware of Minnesota's self-employment tax situation. The state doesn't have its own self-employment tax (that's just federal), but they do have their own rules about what business expenses are deductible that might differ slightly from federal rules.

Great question! I went through this exact confusion when I started my handyman business. You're absolutely right to calculate based on profit, not gross revenue. In your case, with $9,800 revenue minus $6,350 in legitimate business expenses, you'd only need to set aside taxes on the $3,450 profit. One thing that really helped me was creating a simple spreadsheet to track everything in real-time. I have columns for revenue, materials, equipment rental, mileage, and other expenses. This way I can see my actual profit margin throughout the year and adjust my tax savings accordingly. Also, don't forget to track your business use of personal items - like if you use your personal truck for jobs, you can deduct the business mileage. And definitely keep digital copies of all receipts! I learned that lesson when I lost a box of receipts and couldn't claim about $800 in legitimate expenses. The 30% rule is a good starting point for profit, but as others mentioned, factor in your state taxes too. I'd rather set aside a bit extra and get a refund than scramble to find money I don't have come tax time.