How much tax will I pay when I sell my business?

When you sell a business you've held for more than a year, the profit (sale price minus your tax basis) is generally taxed as a long-term capital gain. At the federal level that's roughly 15% to 20% depending on your total income, and almost every state adds its own income tax on top — which is why your all-in rate, and your net check, vary so much by where you live.

Two nuances trip people up. First, the 3.8% net investment income tax is often quoted as automatic, but it generally does not apply to gain from a business you materially participate in (IRC §1411), so many active owner-operators land closer to 20% federal rather than 23.8%. Second, not all of the gain is capital gain: depreciation recapture and the sale of certain assets (like equipment) are taxed at higher ordinary-income rates.

Deal structure changes the bill. Stock sales are usually more favorable to the seller — typically one layer of capital-gains tax — while asset sales (which most buyers prefer) tend to create more ordinary-income recapture and, for C-corporations, can trigger a double tax. Common ways to reduce or defer tax include installment sales via a seller note, rolling equity into the buyer's company, careful purchase-price allocation, and Section 1202 QSBS for qualifying C-corp stock.

These are general ranges, not advice. Your actual tax depends on your entity type, basis, state, and how the deal is papered, so model the after-tax number with a CPA and M&A attorney before you sign an LOI. DealSeam introduces owners to qualified buyers where there's a fit; it is not a traditional business broker and does not provide tax or legal advice.