LLC vs S-Corp Tax Savings Calculator
Find out how much you could save in taxes by electing S-Corp status — and whether the savings justify the added administrative costs.
An S-Corp election can significantly reduce self-employment taxes by splitting income into salary and distributions. But the savings only make sense above a certain profit level. This calculator runs the full comparison — including payroll taxes, income tax brackets, QBI deduction, and S-Corp administrative costs — so you can see your real net savings before making the decision.
Business Details
Tax Settings
Your Estimated S-Corp Savings
LLC / Sole Proprietor
S-Corporation
Key Metrics
How to Use This Calculator
Step 1 — Enter your net business profit
This is your total revenue minus business expenses, before paying yourself or taxes. Do not subtract your salary yet — that is handled separately on the S-Corp side.
Step 2 — Set your S-Corp owner salary
The IRS requires S-Corp owners to pay themselves a reasonable salary for services rendered. This is the amount subject to payroll taxes. The remaining profit becomes a distribution not subject to self-employment or payroll taxes — that is where the savings come from.
Step 3 — Add deductions
Retirement contributions and self-employed health insurance premiums reduce taxable income on both sides of the comparison. Enter what you currently contribute or plan to contribute.
Step 4 — Set your administrative cost estimate
S-Corps require payroll processing, a more complex tax return, and state fees. The default of $2,000 per year is a reasonable estimate for most small businesses. Adjust up if you expect higher accounting or payroll costs.
Step 5 — Add household income if applicable
If you or your spouse have other taxable income, entering it here improves the accuracy of your income tax bracket calculation. It does not affect your SE tax, payroll taxes, or business profit figures.
How the Math Works
LLC / Sole Proprietor: All net profit is subject to self-employment tax (15.3% on 92.35% of profit). Half of SE tax is deductible. A simplified QBI deduction of 20% of qualified income is applied, capped at 20% of AGI. Federal income tax is calculated on AGI minus standard deduction minus QBI deduction using 2025 brackets.
S-Corporation: Only the owner salary is subject to payroll taxes — both the employee share (7.65%) and employer share (7.65%), totaling 15.3% on the salary only. The employer FICA is a business deduction. The remaining profit flows as a distribution not subject to payroll taxes. QBI is calculated on the net S-Corp income. Federal income tax applies to salary plus distribution minus deductions.
The Tax Savings: The difference comes entirely from payroll taxes. As an LLC, you pay 15.3% SE tax on all net profit. As an S-Corp, you pay 15.3% payroll taxes only on the salary portion. On a $60,000 distribution, that saves approximately $9,180 in payroll taxes — before accounting for the additional S-Corp costs.
Break-Even: Calculated dynamically using binary search. The calculator finds the profit level at which S-Corp net savings (tax savings minus admin costs) equals zero. Below this point the LLC is simpler and equally or more cost-effective.
Who This Is For
Freelancers and consultants earning $60,000 or more in net profit wondering if an S-Corp election makes sense
Single-member LLC owners who have been advised to consider S-Corp status but want to see the actual numbers first
Small business owners comparing entity structures before their next tax filing
Accountants and tax professionals who want a quick estimate tool to share with clients evaluating S-Corp elections
Key Considerations Before Electing S-Corp Status
The reasonable salary requirement is non-negotiable
The IRS actively scrutinizes S-Corp owner salaries. Paying yourself $1 to maximize distributions is a red flag that triggers audits and penalties. Your salary should reflect what you would pay someone else to do your job. Industry compensation surveys and Bureau of Labor Statistics wage data are your reference points.
California has an $800 minimum franchise tax
California charges S-Corps an $800 annual minimum franchise tax plus 1.5% of net income. This calculator does not include state-specific entity taxes — California residents should factor this into their analysis and may find the break-even point is higher than the calculator shows.
S-Corps require ongoing compliance
You must run payroll, file quarterly payroll tax returns, issue yourself a W2, file Form 1120-S annually, and maintain corporate formalities. This is real administrative overhead — not just a number in a calculator. Budget time as well as money.
The QBI deduction may change in 2026
The 20% qualified business income deduction is currently scheduled to expire after 2025 under current law. If it is not extended, the tax math shifts slightly in favor of the LLC structure for some taxpayers. Factor this uncertainty into multi-year planning.
S-Corps reduce future Social Security benefits
Social Security benefits are based on your earnings record. As an LLC owner paying SE tax on all profits, you are building a higher earnings record. As an S-Corp owner, only your salary counts toward Social Security. If you pay yourself a low salary to maximize distributions, you are trading future Social Security benefits for current tax savings.