How Much to Set Aside for Taxes in Your Business
One of the most common questions we hear from small business owners is:
“How much should I be setting aside for taxes?”
Many Utah business owners—contractors, medical and dental practices, wellness providers, real estate professionals, agencies, and other service-based businesses—were never really taught how to plan for taxes throughout the year.
So they:
Guess at a number
Hope it’s enough
Feel shocked or stressed when the tax bill finally shows up
The good news? You don’t need a complicated system to stay ahead of taxes. Once we walk clients through a simple approach, they feel more confident and in control of their cash.
You can use the same framework in your business.
Quick note: The exact percentage you should set aside depends on your income, deductions, and business structure, so it’s always wise to confirm specifics with your tax professional. The ideas below are meant as a practical starting point.
1. Set aside a percentage of every payment you receive
Instead of waiting until “later” to think about taxes, build the habit of saving a portion every time money comes in.
A common starting point for many small business owners is 15%–30% of gross income, depending on:
Your total income
Your business structure (sole prop, LLC, S-corp, etc.)
Your typical deductions
Example:
If your business brings in $8,000 in a month and you choose to save 20%, you’d move $1,600 into your tax savings right away.
Doing this consistently:
Prevents the “uh-oh” feeling in March or April
Breaks a big tax bill into smaller, manageable pieces
Helps you stay disciplined throughout the year
2. Review your financial reports each month
Your income usually isn’t the same every single month—especially in service-based businesses with busy and slow seasons. That’s why it’s important to review your Profit & Loss report regularly.
This helps you:
See how your income and expenses are trending
Adjust your savings if your income increases or drops
Avoid under-saving during your busiest months
Example:
If your revenue usually sits around $5,000 per month but jumps to $12,000 during a busy season, increasing your tax savings for that high-revenue month creates a stronger buffer and keeps you prepared.
Clean, up-to-date books make this incredibly easy—no guessing, no digging.
3. Use a separate bank account just for tax savings
This is one of the simplest and most powerful changes you can make.
When all your money sits in one account, it’s very easy to:
Spend what you meant to save
Lose track of what truly “belongs” to the business
Treat tax money like extra cash
Do this instead:
Open a separate business savings account for taxes only.
Then:
Move your tax percentage into that account as deposits come in
Leave it alone—no transfers back for “just this one thing”
Let it build over time so tax season is covered
Many of our clients have told us that before they separated their tax savings, they kept accidentally spending what they intended to save. Once they created a dedicated account, it became much easier to stay on track.
Tax savings is about more than just compliance
Setting money aside for taxes isn’t just about avoiding penalties or interest. It’s about:
Stability – knowing you can cover what’s coming
Predictability – no more guessing or hoping it works out
Peace of mind – being able to focus on serving your clients instead of worrying about the IRS
When you pair smart tax saving habits with accurate bookkeeping, your entire financial picture becomes clearer and less stressful.
Want help staying organized and prepared for tax season?
Clarke Financials helps Utah small business owners:
Keep their books clean and current
Understand their income and expenses
Stay organized and ready for tax time
Make better financial decisions with clear reports
If you’d like support staying on top of your numbers and taking the stress of your business finances off your plate, we’re here to help.
Reach out to schedule a quick, no-pressure call
