LLC vs S-corp Tax Calculator
Once your LLC is profitable, electing S-corp status can cut your self-employment tax — but only past a certain profit, and only after the extra payroll cost. Enter your numbers to estimate the annual savings, see the salary-vs-distribution split, and find out whether the election is worth it yet.
Profit after expenses, before paying yourself.
What you'd pay yourself for the work. Must be defensible — we pre-fill a rough starting point.
Payroll service + extra tax prep. Often ~$1,200–$2,500/yr.
We compare the 15.3% self-employment tax a default LLC pays on profit against the payroll tax an S-corp pays only on your salary.
Estimated S-corp savings
— per year
- SE tax as a default LLC
- —
- Payroll tax as an S-corp
- —
- Payroll tax saved
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- Less: S-corp running cost
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How to use it
- 1 Enter your annual net profit (after expenses, before paying yourself).
- 2 Set a reasonable W-2 salary for your role — we pre-fill a rough starting point.
- 3 Adjust the added cost of running an S-corp (payroll + tax prep).
- 4 Read the estimated yearly savings and breakdown, then confirm with a CPA.
Why this matters
A default LLC pays 15.3% self-employment tax on essentially all profit. An S-corp splits your pay into a “reasonable salary” (still subject to that 15.3% payroll tax) and a distribution (which isn’t) — so the tax disappears on the distribution. The catch: the IRS requires the salary to be genuinely reasonable, and running payroll adds real cost. The savings only beat that cost once profit is high enough — often somewhere above $40k–$80k of profit over a reasonable salary. This estimates the payroll-tax delta; income tax is roughly the same either way.
Frequently asked questions
At what income does an S-corp make sense?
There’s no hard line, but the payroll-tax savings usually start to beat the added payroll and accounting cost once profit is comfortably above a reasonable salary — often in the $40,000–$80,000 profit range and up. Below that, the cost of running an S-corp can outweigh the savings. Enter your real numbers to find your own break-even.
What is a “reasonable salary” for an S-corp?
It’s the wage you’d pay someone else to do your job — defensible to the IRS based on your role, experience, hours, and industry. Paying yourself an artificially low salary to dodge payroll tax is a classic audit trigger. This tool pre-fills a rough starting figure; a CPA should set the real number.
Does an S-corp save income tax too?
Not directly — the main S-corp savings are on self-employment/payroll tax, which is what this calculator estimates. Income tax is broadly similar either way, and the QBI deduction can interact with your salary choice. That’s exactly the nuance to run past a CPA.
Is an LLC or an S-corp better?
“S-corp” isn’t a separate entity — it’s a tax election an LLC (or corporation) can make. You keep your LLC and ask the IRS to tax it as an S-corp. It’s better only when the tax savings outweigh the added cost and complexity, which this tool helps you estimate. It is not tax advice — confirm with a CPA.
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