LLC vs S-Corp Tax Savings Calculator
See the approximate self-employment tax you save by electing S-corp status and paying yourself a reasonable salary instead of taxing all profit as self-employment income.
How it works
LLC SE tax = 15.3% × (profit × 92.35%) · S-corp payroll = 15.3% × salary (SS capped at $168,600) · Savings = LLC SE tax − S-corp payroll tax
A single-member LLC is taxed as a sole proprietor, so all net profit is subject to self-employment tax. An S-corp election lets you split profit into a reasonable salary (subject to payroll tax) and distributions (not subject to SE or payroll tax), which can cut the 15.3% bite on the distribution portion. The salary must be reasonable for your role, and running payroll adds administrative cost, so the savings must clear that hurdle to be worthwhile.
Worked example
On $120,000 profit, LLC SE tax is 15.3% × (120,000 × 0.9235) ≈ $16,956. As an S-corp paying a $60,000 salary, payroll tax is 15.3% × 60,000 = $9,180 and the other $60,000 is a distribution — saving about $7,776 before payroll and filing costs.
Frequently asked questions
What is a "reasonable salary"?
The IRS requires S-corp owner-employees to pay themselves a wage comparable to what similar work would earn elsewhere. Setting it artificially low to dodge payroll tax is a common audit trigger.
Are there costs that offset the savings?
Yes. An S-corp requires payroll processing, a separate 1120-S return, and often extra accounting fees — commonly $1,000–$2,500 a year. The election usually makes sense once profit is well above the salary you would pay.
Does this include income tax?
No. Both structures pass profit through to your personal return, so income tax is similar. The difference this tool shows is the self-employment/payroll tax on the distribution portion.
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Educational estimate using simplified US federal rules — ignores state tax, credits and your full situation. Not tax advice; confirm with a CPA or IRS guidance.