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LLC vs S-Corp Tax Calculator

The S-Corp election does not change your income tax. It changes how much of your profit is exposed to self-employment tax. This estimates that difference so you can see whether the election is worth the extra paperwork at your numbers.

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Default LLC — SE tax

$16,955

On the full net profit

S-Corp — FICA on salary

$9,945

$55,000 paid as distributions, FICA-free

Estimated savings

$7,010

per year with S-Corp election

This is an estimate, not tax advice. It uses simplified 2026 federal Social Security/Medicare rates and ignores state taxes, the S-Corp payroll/filing costs, and the additional Medicare surtax on high incomes. Also — the IRS requires your S-Corp salary to be "reasonable" for your role and industry; setting it artificially low to dodge FICA tax is an audit risk, not a strategy. Talk to a CPA before electing S-Corp status.

How to read this

A default LLC pays self-employment tax — 15.3% covering Social Security and Medicare — on essentially all of its net profit. With an S-Corp election, you pay yourself a salary, and payroll taxes apply only to that salary. Profit distributed above it is not subject to self-employment tax.

That is where the saving comes from, and also where the catch is: the IRS requires the salary to be reasonable for the work you actually do. Setting it artificially low to shrink the tax is the single most common way an S-Corp election goes wrong in an audit.

An S-Corp also costs money to run — payroll filings, a separate return, usually a bookkeeper or accountant. A common rule of thumb is that the election starts making sense once the estimated saving comfortably exceeds those costs, not the moment it turns positive.

Common questions

What counts as a reasonable salary?
There is no formula in the tax code. In practice it means what you would have to pay someone else to do your job — supported by role, hours, experience and industry data. If your business nets $120,000 and you pay yourself $20,000, that is difficult to defend.
At what profit does an S-Corp election start to make sense?
It depends on your salary level and what payroll and accounting cost you. Rather than trust a threshold you read somewhere, put your own numbers in above and compare the estimated saving against what your accountant would charge to run it.
Is an S-Corp a different type of company?
No. It is a tax election, not an entity type. An LLC can elect to be taxed as an S-Corp and remain an LLC in every other respect.

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