See whether electing S corporation status would save you money. As a sole proprietor or single-member LLC you pay 15.3% self-employment tax on nearly all profit; as an S corp you pay payroll tax only on a reasonable salary, but take on extra costs. This calculator compares both after income tax.
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Business
$
Revenue minus expenses, before paying yourself.
$
What you would pay someone to do your job; the IRS requires it.
$
Payroll service, separate 1120-S return, state fees.
%
E.g. California 1.5% (min. $800 franchise tax). 0 if none.
You
$
W-2 wages (yours or a spouse's) and other taxable income.
%
Above the income threshold, service businesses lose the QBI deduction.
Enter your values to see the result.
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How to use the LLC vs S Corp Tax Calculator
Enter your net business profit before any owner salary.
Set a reasonable salary for the S corp, plus extra costs such as payroll service and tax prep.
Add your filing status, other household income and state tax rate.
Choose whether to include the QBI deduction and FUTA.
Read the yearly savings and check the salary table to see how the salary choice changes the result.
How the comparison works
Sole proprietor / single-member LLC
Self-employment tax = profit × 92.35% × 15.3% (12.4% Social Security up to the wage base, 2.9% Medicare on all)
Income tax on profit − half of SE tax, after the standard deduction and (optionally) the 20% QBI deduction. Above the QBI income threshold ($201,750 single / $403,500 joint taxable income in 2026, phased in over $75,000 / $150,000) the deduction is limited to 50% of W-2 wages paid, which is $0 for a sole proprietor, and service businesses lose it entirely.
S corporation
Payroll tax = 7.65% employer + 7.65% employee on the salary only, plus FUTA (0.6% of the first $7,000)
K-1 profit = profit − salary − employer payroll tax − extra costs − any state entity tax
Income tax on salary + K-1 profit; QBI applies only to the K-1 profit
Savings = total LLC taxes − (S corp taxes + extra costs). Federal income tax is counted only for the business income, so other household income just sets your bracket.
Self-employment tax vs. payroll tax on the salary
Net profit
SE tax as LLC
Salary (50%)
Payroll tax on salary
FICA saved before costs
$50,000
$7,065
$25,000
$3,825
$3,240
$80,000
$11,304
$40,000
$6,120
$5,184
$120,000
$16,955
$60,000
$9,180
$7,775
$200,000
$28,234
$100,000
$15,300
$12,934
2026 Social Security wage base $184,500, no other wages. Real savings are lower once extra S corp costs and income-tax effects are included, which the calculator handles.
Before you elect S corp status
Elect on time: Form 2553 is generally due within 2 months and 15 days of the start of the tax year the election should apply to.
Run real payroll: the salary must go through payroll with withholding and quarterly Form 941 filings.
Check your state: some states charge entity-level taxes or minimum franchise taxes, and a few do not recognize the S election.
Talk to a tax professional about your reasonable salary, retirement plan contributions and health insurance, which can change the result.
Frequently asked questions
How does an S corp save on taxes?
A sole proprietor or default LLC pays 15.3% self-employment tax on 92.35% of all profit. An S corp owner pays Social Security and Medicare only on the salary paid through payroll; the remaining profit is passed through as a distribution that is subject to income tax but not to FICA.
At what profit does an S corp make sense?
It depends on your salary and costs, but S corp savings often start to outweigh the extra payroll, accounting and state costs somewhere around $40,000 to $80,000 of net profit. Use the profit-level table to see where the break-even falls for your numbers.
What is a reasonable salary?
The IRS requires S corp shareholder-employees to pay themselves reasonable compensation for the services they perform, roughly what a business would pay someone else to do the job. Setting it too low to avoid payroll taxes is a common audit issue. Many advisers look at industry salary data for your role.
Is an LLC the same as an S corp?
No. An LLC is a legal entity formed under state law. An S corp is a federal tax election. A single-member LLC is taxed like a sole proprietorship by default, and it can elect to be taxed as an S corporation by filing Form 2553.
Does an S corp lower income tax?
Usually not much. The main saving is payroll tax. The QBI deduction can be slightly lower for an S corp because the owner's salary does not qualify, and the employer half of payroll tax is a business expense, so federal income tax can move a little either way.
What extra costs does an S corp have?
Running payroll (software or a service), filing a separate Form 1120-S business return, possible state franchise or entity taxes, state unemployment insurance and more bookkeeping. Together these often cost $1,500 to $3,000 a year or more.
Does this include state unemployment tax (SUTA)?
Not separately. SUTA rates and wage bases vary by state; add an estimate to the extra S corp costs if your state charges it on owner salaries.
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