Running a US small business from abroad means keeping track of taxes on top of everything else — which filings apply to you, which deductions you’re leaving on the table, and which rules changed since you last checked. This guide is written primarily for a foreign individual (a nonresident alien) who owns a US single-member LLC — the most common structure among non-resident founders. Where the rules differ for a US citizen or resident running the same kind of business, we call that out separately.
Quick summary: whether you file a personal US return at all depends on whether your business has effectively connected income — that’s separate from the entity-level Form 5472 filing that applies every year regardless. Once that’s settled, several deduction limits went up for 2026, and a handful of 2025 tax-law changes (bonus depreciation especially) are worth knowing about.
Your 2026 filings, before we talk deductions
Before any deduction matters, it helps to know which filings actually apply to you. For a nonresident alien who owns a US single-member LLC:
- Entity-level filing, every year, regardless of income: your LLC is a foreign-owned disregarded entity by default, which means a pro-forma Form 1120 with Form 5472 attached is due annually — even with zero activity.
- Personal filing — only if you have effectively connected income (ECI): if your LLC’s income is “effectively connected” with a US trade or business, you file Form 1040-NR to report and pay tax on that income. If your LLC’s activity doesn’t rise to a US trade or business, you may not have a personal US return to file at all — this is worth confirming with an advisor rather than assuming either way.
- Self-employment tax: as a nonresident alien, you generally don’t owe US self-employment tax on your business income at all. The IRS excludes nonresident aliens from it, unless a bilateral totalization agreement places you under the US Social Security system.
Figuring out which filings apply to your specific situation is exactly the kind of thing we handle as part of federal tax filing.
If you’re a US citizen or resident instead
A few figures apply if you’re a US person running a small business, rather than a nonresident alien: self-employment tax is 15.3% on net earnings (the Social Security portion caps at $184,500 for 2026), the QBI deduction is 20% of qualified business income (permanent since the 2025 tax law reset), and the standard mileage rate is 72.5¢ per mile for 2026.
How your business structure changes the math
| Structure | Tax form | Available to a nonresident alien owner? | Key point |
|---|---|---|---|
| Single-member LLC (foreign-owned) | Pro-forma 1120 + Form 5472 (entity level); Form 1040-NR only if you have ECI | Yes — the standard structure for non-resident founders | No US self-employment tax for a nonresident alien owner |
| Multi-member LLC | Form 1065 + K-1s | Yes | Files as a partnership by default |
| C-Corporation | Form 1120 | Yes | Corporate-level tax; no owner-level self-employment tax either way |
| S-Corporation | Form 1120-S + K-1s | No — S-Corp shareholders must generally be US citizens or residents | Not an available option if you’re a nonresident alien |
| Sole proprietorship | Schedule C (Form 1040) | Only relevant for a US citizen or resident; a nonresident alien doing business in the US would typically use an LLC instead | No liability protection |
As a nonresident alien you’re generally not subject to US self-employment tax at all — the exceptions are a totalization agreement that covers you under the US system, or becoming a US tax resident. Income tax on effectively connected US business income is a separate question from self-employment tax, and the entity-level Form 5472 filing requirement above applies either way.
If you haven’t picked a structure yet, our breakdown of Wyoming vs. Delaware covers how state choice interacts with these federal forms, and company formation covers the rest.
Deductions most non-resident founders miss
These deductions apply against income reported on Form 1040-NR — that is, if you have effectively connected income to report in the first place (the entity-level pro-forma 1120/5472 filing is informational and doesn’t itself report income or deductions). The ones we see founders skip most often:
- Home office: $5 per square foot up to 300 sq ft (max $1,500), or your actual prorated costs.
- Vehicle use: 72.5¢/mile for 2026, backed by a mileage log.
- Self-employment tax: for a US citizen or resident who owes it, half of what you pay is itself deductible. Not applicable if you’re a nonresident alien, since you generally don’t owe US self-employment tax in the first place.
- Health insurance premiums, if you’re not eligible for coverage through an employer.
- Retirement contributions — a SEP IRA or Solo 401(k) reduces this year’s taxable income, primarily relevant to US citizens and residents with self-employment earnings.
- Business meals: 50% deductible, with proper documentation.
- Professional services — accounting, legal, and registered agent fees.
- Software, marketing, and office supplies used for the business.
The 20% Qualified Business Income deduction is permanent, not a temporary provision anymore. It applies against qualifying US-source business income reported on a return — sole proprietors, partners, and S-corp shareholders (all US persons) can claim it, as can a nonresident alien with effectively connected income on Form 1040-NR — though some service businesses phase out at higher income levels, so it’s worth checking exactly where you land.
What changed for 2026
The tax law reset signed in mid-2025 touched several provisions small businesses rely on. Here’s what’s actually different heading into 2026:
Section 179 and bonus depreciation. Section 179 now lets you expense up to $2,560,000 in equipment and vehicle purchases immediately, phasing out once purchases pass $4,090,000 — both figures adjusted for inflation each year going forward. Bonus depreciation is back to 100%, permanently, for qualifying property placed in service after January 19, 2025. If you’ve seen older guides describing a 60% phase-down, that’s now out of date — the 2025 reset restored full first-year expensing.
R&D costs. Domestic research and development costs are once again fully deductible in the year you incur them, reversing a multi-year amortization requirement that had been in place since 2022. This applies on top of the separate R&D tax credit, and it’s still one of the more underclaimed benefits among small businesses that qualify.
Work Opportunity Tax Credit — a caveat worth knowing. This credit, worth up to $2,400 per qualifying hire, lapsed at the end of 2025 and hadn’t been renewed as of this update. That’s not unusual — Congress has let it expire and then renewed it retroactively more than a dozen times before. If you’re hiring from a targeted group (veterans and SNAP recipients among them), keep your paperwork on file so you’re ready to claim it if it’s reinstated.
Small Business Health Care Credit. Still available, worth up to 50% of premiums paid, if you have fewer than 25 full-time employees and cover at least half of their premium costs — the full credit is reserved for the smallest, lowest-average-wage employers.
Deadlines, in short
Your filing deadline follows your entity type: multi-member LLCs (and S-corps, for US citizen or resident owners) file in mid-March, while C-Corps and foreign-owned single-member LLCs — filing a pro-forma Form 1120 with Form 5472 attached — file by mid-April, both with an automatic extension available if you need more time. We’ve laid out this year’s exact dates, including where things stand on extensions, in our full deadline guide.
If you have effectively connected income and expect to owe $1,000 or more for the year, you’ll also make quarterly estimated payments, generally due April 15, June 15, and September 15, plus January 15 of the following year for the fourth quarter.
If you have employees or contractors, W-2s and 1099-NECs for the 2026 tax year are due to recipients by January 31 the following year (or the next business day if that lands on a weekend). Extensions push your filing date, not your payment date — interest keeps accruing on anything still owed after the original deadline.
Planning moves that actually help
Time your income and expenses. If this year was strong, cash-basis taxpayers can often defer income into next year and accelerate deductible expenses into this one — useful if it shifts you into a lower bracket or just buys planning time.
Maximize retirement contributions, if you’re eligible. This applies mainly to US citizens and residents with self-employment earnings. A SEP IRA lets you contribute up to 25% of net self-employment income, capped at $72,000 for 2026. A Solo 401(k) allows higher combined limits between employee and employer contributions.
Lean on the reinstated bonus depreciation. Combined with the higher Section 179 cap, most equipment purchases can now be fully expensed in the year you place them in service — worth factoring into the timing of any planned purchase, if you have US-source business income to offset.
Put family on payroll, if the work is real. For a US citizen or resident business owner, paying a child or other family member for legitimate business work shifts income into what’s often a lower bracket. A child’s earnings up to the 2026 standard deduction — $16,100 — can be tax-free to them.
Mistakes we see most often
- Mixing personal and business finances — one shared account makes every deduction harder to defend if questioned.
- Weak recordkeeping — missing receipts are the single most common reason a deduction gets disallowed.
- Misclassifying contractors as employees, or the reverse — the IRS looks closely at control and independence.
- Skipping quarterly estimated payments — a routine, fixable gap, but one that adds up if it’s not tracked.
- Leaving credits unclaimed — R&D, WOTC when it’s active, and retirement-plan startup credits are dollar-for-dollar reductions, more valuable than a deduction of the same size.
Underpaying your quarterly estimates adds interest on the shortfall for each quarter it’s outstanding. It’s an easy gap to close once you know your numbers — we calculate and track your quarterly payments so there’s nothing to estimate on your own.
How we handle it
Federal filing is priced per filing, one-time: $399 for a foreign-owned single-member LLC (pro-forma Form 1120 with Form 5472 attached), or $899 for a C-Corp (Form 1120). Multi-member LLC returns (Form 1065) are coming soon. We prepare your return from the details you send us and give you a copy plus a submission record once it’s filed.
If you’d rather bundle everything, Full Compliance ($1,999/year + state fees) covers federal filing, state compliance filing, and bookkeeping together, keeping your books current so the numbers behind every deduction are already accurate when tax season arrives. Formation Essentials ($199/year + state fees) covers formation and registered agent service but doesn’t include tax filing or bookkeeping — those are add-ons or part of Full Compliance. Either way, we track your quarterly estimates, flag deductions you’re eligible for, and file on time.
A quick 2026 checklist
- Confirm whether you have effectively connected income — it decides whether you file a personal return at all.
- Confirm your entity type — it decides which entity-level form and which deadline apply to you.
- Set aside time before year-end to review income/expense timing and any equipment purchases.
- If you’re a US citizen or resident, maximize retirement contributions before your filing deadline, not after.
- Make each quarterly estimated payment as it comes due, rather than catching up at year-end.
- Keep documentation for any hire that might qualify for a lapsed credit like WOTC.
- Send us your year’s transaction summary as soon as it’s ready — earlier is easier for everyone.
None of this needs to sit on your to-do list indefinitely. It’s built into every one of our federal tax plans: we track the deadline that applies to your entity, prepare the return, and file it on time, with copies and a submission record for your files. If you want a second look at your specific situation before year-end, reach out and we’ll walk through it with you.
