LLC vs S-Corp Tax Calculator
Calculate the potential self-employment tax savings of electing S-Corp status for your LLC. S-Corps allow you to split income between salary and distributions.
📅 Tax Year:
Compare Entities
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Income
after expenses (before owner pay)
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Must be
reasonable for your role
How It Works
LLC (Sole Proprietorship)
You pay self-employment tax (15.3%) on 100% of your net profit.
S-Corp
You pay self-employment tax (FICA) only on your salary. The remaining profit is taken as a "distribution," which is not subject to self-employment tax.
Example: $100k profit. $60k salary. You save 15.3% tax on the $40k distribution (~$6,000 savings).
Important Considerations
- Reasonable Salary: The IRS requires you to pay yourself a "reasonable salary" for the work you do. Setting it too low to save taxes is a red flag.
- Payroll Costs: S-Corps must run payroll, which costs money (service fees, unemployment insurance). Ensure savings outweigh these costs.
- QBI Deduction: S-Corp election affects your Qualified Business Income deduction calculation.
Use Cases
- Comparing total tax liability between LLC (sole proprietor) and S-Corp election
- Calculating potential self-employment tax savings from the S-Corp salary/distribution split
- Determining if your business profit level justifies the costs of S-Corp election
- Setting a reasonable salary that passes IRS scrutiny for S-Corp owners
- Evaluating whether S-Corp payroll costs offset the self-employment tax savings
Assumptions & Limitations
- LLC income is subject to full self-employment tax (15.3%) on 92.35% of net profit
- S-Corp owner pays FICA only on salary; distributions are not subject to self-employment tax
- The IRS requires a reasonable salary for S-Corp shareholders who perform services
- Does not account for payroll processing costs, unemployment insurance, or state-specific fees
- Does not calculate the Qualified Business Income (QBI) deduction impact
- Assumes a single-owner LLC or single-shareholder S-Corp for simplicity
How to use this calculator
- Enter the filing status, income, deduction, credit, withholding, and other fields that apply to your situation.
- Run the calculator and review the tax estimate, rate, deduction, or planning result shown on the page.
- Compare the result with IRS forms, state rules, and your own records before making payment or filing decisions.
Frequently Asked Questions
S corp tax savings calculator for LLC?
Start with the key tax inputs and keep each number easy to verify. For the LLC vs S-Corp Tax Calculator, start with net business profit, reasonable salary, payroll taxes, distributions, state fees, bookkeeping cost, and filing costs. Then use: S corp savings = self-employment tax avoided on distributions - added payroll and compliance costs. If $60,000 of profit can legitimately be paid as distributions instead of sole-proprietor net earnings, the payroll tax savings may be meaningful, but not free. Read the result as estimated payroll tax difference and break-even profit level. A low salary just to save tax is a common audit problem.
LLC vs S corp self employment tax calculator?
Put the two choices in separate columns so the tradeoff is visible. In the LLC vs S-Corp Tax Calculator, enter net business profit, reasonable salary, payroll taxes, distributions, state fees, bookkeeping cost, and filing costs. The comparison should look at estimated payroll tax difference and break-even profit level, not just gross income. The working formula is: S corp savings = self-employment tax avoided on distributions - added payroll and compliance costs. If $60,000 of profit can legitimately be paid as distributions instead of sole-proprietor net earnings, the payroll tax savings may be meaningful, but not free. A low salary just to save tax is a common audit problem.
How much can an S corp save on taxes?
Use this as a planning estimate, then reconcile it with the actual tax forms. Enter net business profit, reasonable salary, payroll taxes, distributions, state fees, bookkeeping cost, and filing costs in the LLC vs S-Corp Tax Calculator. A practical formula is: S corp savings = self-employment tax avoided on distributions - added payroll and compliance costs. If $60,000 of profit can legitimately be paid as distributions instead of sole-proprietor net earnings, the payroll tax savings may be meaningful, but not free. Review estimated payroll tax difference and break-even profit level. A low salary just to save tax is a common audit problem.
S corp salary distribution calculator?
Use the calculator for a working estimate instead of relying on a rough guess. For the LLC vs S-Corp Tax Calculator, start with net business profit, reasonable salary, payroll taxes, distributions, state fees, bookkeeping cost, and filing costs. Then use: S corp savings = self-employment tax avoided on distributions - added payroll and compliance costs. If $60,000 of profit can legitimately be paid as distributions instead of sole-proprietor net earnings, the payroll tax savings may be meaningful, but not free. Read the result as estimated payroll tax difference and break-even profit level. A low salary just to save tax is a common audit problem.
What income level makes S corp worth it?
Keep the inputs practical for this estimate. The main rule is that an S corp can split owner compensation between reasonable wages and distributions, but wages must be real and payroll must be handled correctly. For the LLC vs S-Corp Tax Calculator, use net business profit, reasonable salary, payroll taxes, distributions, state fees, bookkeeping cost, and filing costs and review estimated payroll tax difference and break-even profit level. If $60,000 of profit can legitimately be paid as distributions instead of sole-proprietor net earnings, the payroll tax savings may be meaningful, but not free. A low salary just to save tax is a common audit problem.
LLC taxed as S corp calculator 2026?
Start with the key tax inputs and keep each number easy to verify. Enter net business profit, reasonable salary, payroll taxes, distributions, state fees, bookkeeping cost, and filing costs in the LLC vs S-Corp Tax Calculator. A practical formula is: S corp savings = self-employment tax avoided on distributions - added payroll and compliance costs. If $60,000 of profit can legitimately be paid as distributions instead of sole-proprietor net earnings, the payroll tax savings may be meaningful, but not free. Review estimated payroll tax difference and break-even profit level. A low salary just to save tax is a common audit problem.
S corp vs sole proprietor tax calculator?
Put the two choices in separate columns so the tradeoff is visible. In the LLC vs S-Corp Tax Calculator, enter net business profit, reasonable salary, payroll taxes, distributions, state fees, bookkeeping cost, and filing costs. The comparison should look at estimated payroll tax difference and break-even profit level, not just gross income. The working formula is: S corp savings = self-employment tax avoided on distributions - added payroll and compliance costs. If $60,000 of profit can legitimately be paid as distributions instead of sole-proprietor net earnings, the payroll tax savings may be meaningful, but not free. A low salary just to save tax is a common audit problem.
Sources & References
- IRS Publication 3402 — Taxation of Limited Liability Companies
- IRS Form 2553 Instructions — Election by a Small Business Corporation (S-Corp)
- IRS Publication 334 — Tax Guide for Small Business
- IRS S-Corporations — S-Corp overview and requirements
- IRS Self-Employment Tax — Social Security and Medicare taxes
Disclaimer: This calculator provides estimates for educational purposes only. It does not constitute tax advice. Consult a qualified tax professional for advice specific to your situation.