Not as a separate item, for a single-member LLC taxed as a sole proprietorship. An owner's draw is not a business deduction and is not taxed on its own: tax is figured on the net profit on Schedule C. For the 2026 tax year, self-employment tax of 15.3% applies to net earnings (92.35% of net profit) of $400 or more, with the 12.4% Social Security part only up to $184,500. A ProfitDrawer spreadsheet keeps owner draws out of profit.
How it depends on your LLC's tax setup:
- Single-member LLC (disregarded entity): profit goes on Schedule C. IRS Publication 334 (2025) says you cannot deduct your own salary or any personal withdrawals, because as a sole proprietor you are not an employee of the business.
- LLC with two or more members taxed as a partnership: the LLC files Form 1065 and pays no income tax itself. Each member reports their share of the profit or loss on their own return.
- Business taxed as an S corporation: the corporation must pay a shareholder-employee reasonable compensation for services before making non-wage distributions.
Example (example numbers only): a single-member LLC makes $40,000 profit in 2026 and the owner draws $25,000. Tax is figured on the $40,000 of profit, not on the $25,000 drawn.
Why draws still matter: they reduce the cash left in the business, so set aside money for estimated tax before you draw. General information, not tax advice.
Source: IRS Publication 334 (2025), Tax Guide for Small Business · Updated
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General information, not tax, legal or financial advice. Check the rules for your state and your situation.