LLC vs. S-Corp Tax Savings Calculator
Free LLC vs S-Corp calculator. See how much self-employment tax an S-Corp election could save vs. staying a sole prop/default LLC, based on your reasonable salary.
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Estimated Annual Savings as S-Corp
Estimated • Based on your inputs
Take-Home as Sole Prop / LLC
$81,764.00
Take-Home as S-Corp
$85,989.00
Detailed Breakdown
Disclaimer: This calculator provides estimates for informational purposes only. Results should not be considered financial, tax, or legal advice. Consult a qualified professional for your specific situation.
How This Calculator Works
Calculation methodology and assumptions
As a sole proprietor or default-taxed LLC, 100% of net business profit is subject to self-employment tax: 15.3% (12.4% Social Security up to the Social Security wage base, plus 2.9% Medicare, plus an additional 0.9% Medicare above the income threshold) on 92.35% of net earnings, per IRS Schedule SE. Electing S-Corp status requires paying the owner-employee "reasonable compensation" (W-2 salary, subject to ordinary employer + employee payroll FICA) — but any remaining profit can be paid as a distribution, which is exempt from self-employment and payroll tax entirely. Federal and state income tax still apply to both salary and distributions. This calculator computes take-home pay under both structures and nets out the extra administrative cost of running payroll and filing a separate S-Corp return. It does not model the separate Section 199A Qualified Business Income deduction — its own income thresholds, wage/UBIA limits, and business-type rules are involved enough to warrant a dedicated tool; use the QBI (Section 199A) Deduction Calculator linked below to estimate that deduction on top of these results.
Compare the 2026 LLC and S-Corp model
- 1
Enter profit before owner pay
Use annual business profit before the owner salary and distribution. Enter a supportable reasonable salary separately; this tool does not determine what the IRS will accept.
- 2
Set filing status and costs
Choose single or married filing jointly. Enter a flat state-rate assumption and your own annual payroll and tax-preparation cost quote.
- 3
Compare after-cost results
Read the LLC SE tax and S-Corp payroll tax separately from the overall estimated take-home difference. A payroll-tax gap alone is not the net economic benefit.
Read the inputs and reconcile the outputs
Use one business profit figure in both columns. Hold the filing status and flat state assumption constant, then change the reasonable salary and extra S-Corp costs to see which assumptions drive the difference.
The LLC branch models SE tax on business earnings. The S-Corp branch models employer and employee payroll tax on salary only. Remaining non-wage distributions are not subject to payroll tax in this model. The model separately estimates income tax using salary plus the remaining business income; it does not determine the tax treatment of an actual cash distribution. The branch then deducts the entered extra administrative costs from its take-home result.
Result: A positive modeled savings result is conditional, not a recommendation or guaranteed saving. The model does not include QBI, other household wages, credits, all state entity taxes or every deduction interaction. A state-law LLC and a federal S-Corp election are different concepts.
What changes this estimate
Salary and distributions
The split changes payroll taxes in the model; actual classification must comply with IRS requirements.
Omitted interactions
QBI and state franchise or entity taxes can change the comparison. Both branches use simplified isolated-income assumptions.
Limits and checks before acting
- Do not lower a salary solely to produce an attractive calculator result; reasonable compensation depends on the work performed.
- Payroll processing and a separate return have real costs even if modeled savings are small or negative.
- Use the linked IRS compensation guidance and a qualified adviser for election eligibility, timing and compensation.
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StateCalc Team
Editorial Team
The StateCalc team builds free financial calculators using data from official government sources including the IRS, U.S. Census Bureau, BLS, and state revenue departments. All formulas are validated by an automated test suite and cross-referenced against published data.
Our editorial standardsFrequently Asked Questions
How much can an S-Corp election actually save me?
It depends entirely on the gap between your total business profit and the "reasonable salary" the IRS would expect for your role. The larger that gap (i.e., the more profit that can become a distribution instead of salary), the more self-employment/payroll tax you avoid. No universal profit threshold or savings amount is established here. Enter your own reasonable salary and administrative-cost quotes; QBI, state entity taxes and omitted household interactions can change the comparison.
What is "reasonable compensation" and why does it matter?
The IRS requires S-Corp owner-employees to be paid a salary that reflects fair market value for the work they actually perform for the business, before any profit is distributed. Per IRS guidance, distributions and other payments to a corporate officer are treated as wages (and subject to employment tax) to the extent they represent reasonable compensation for services rendered. Setting your "salary" artificially low to dodge payroll tax is a well-documented audit risk — the IRS can reclassify distributions as wages retroactively, with back taxes and penalties.
Is an S-Corp always better than an LLC for taxes?
No. S-Corp election adds real complexity and cost: running payroll, withholding and remitting payroll taxes, and filing a separate Form 1120-S corporate return (plus a personal return). For lower-profit businesses, or businesses where nearly all profit must be paid out as reasonable salary anyway, the tax savings can be smaller than the added administrative cost. Run your own numbers above rather than assuming S-Corp is automatically the right move.
Can a single-member LLC elect S-Corp taxation?
Yes. An LLC is a state-law business structure; S-Corp is a federal tax election (IRS Form 2553) layered on top of it. A single-member LLC, multi-member LLC, or a traditional corporation can all elect to be taxed as an S-Corp if they meet IRS eligibility rules (generally, 100 or fewer shareholders, one class of stock, and U.S. individual/certain trust shareholders only).
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