LLC vs. S-Corp Tax Calculator
Compare total taxes owed as a single-member LLC versus an S-Corporation to find your break-even point and see exactly how much an S-Corp election could save you.
About this calculator
Single-member LLCs are taxed as sole proprietors by default — all net profit flows to the owner and is subject to self-employment (SE) tax (15.3% on 92.35% of profit), plus ordinary income tax. An S-Corporation election changes this: the owner takes a "reasonable salary" subject to payroll taxes, and the remaining profit is distributed as pass-through income that avoids FICA entirely. The savings come from that untaxed distribution — but S-Corps add annual overhead (payroll service, extra accounting) that must be recovered before the election pays off. This calculator computes both scenarios and finds the precise profit level where an S-Corp election starts saving money.
Field explanations
- Net business profit
- Your business's net income after all operating expenses — the amount on Schedule C (LLC) or Form 1120-S (S-Corp). This is the base that gets taxed differently under each structure.
- S-Corp owner W-2 salary
- The salary the IRS requires you to pay yourself as an S-Corp owner-employee. It must be "reasonable" for your role and industry — too low a salary is an IRS audit trigger. A common rule of thumb is to pay yourself roughly 40–60% of net profit, or benchmark against market rates for your position. Only the salary portion is subject to payroll taxes.
- SE / FICA tax rate
- The combined self-employment or payroll tax rate. The current US rate is 15.3% (12.4% Social Security + 2.9% Medicare) on income up to the SS wage base (~$168,600 in 2024), then 2.9% above that. Leave at 15.3% unless your income exceeds the SS wage base.
- Effective income tax rate
- Your estimated combined federal and state effective (average) income tax rate on ordinary income. Use your marginal federal bracket plus your state rate as a rough estimate. Common ranges: 22–24% federal + 0–9% state = 22–33% combined.
- S-Corp annual overhead
- Additional costs of running an S-Corp that don't apply to a sole-prop LLC: payroll processing service ($500–$1,200/yr), extra CPA work for the S-Corp return and payroll filings ($1,000–$2,500/yr), and sometimes state franchise taxes. This overhead must be recovered by the tax savings before the S-Corp election is worthwhile.