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MoneyMath

LLC vs S-Corp Tax Savings Calculator (2026)

See how much you'd actually save by electing S-corp status on your LLC — with payroll costs, FICA, and the reasonable salary included. Updated for 2026 SSA wage base.

🟢 Updated April 2026👤 Reviewed by MoneyMath Editorial⚡ Runs in your browser · no data sent
$

Gross revenue minus deductible business expenses.

$

Defensible wage you would pay yourself through W-2 payroll.

Your highest bracket for 2026. Not your effective rate.

$

Yearly cost for payroll service + extra tax return. ~$800–$1,800 typical.

Estimated S-Corp Savings
$6,744
S-Corp election looks favorable
LLC total tax burden$43,721
S-Corp total (with payroll fees)$36,977
LLC self-employment tax$16,955
S-Corp FICA (both sides)$9,180
S-Corp distribution (no SE tax)$55,410
Show the formula
SE tax = profit × 0.9235 × 15.3%
S-Corp FICA = salary × 15.3%
Distribution = profit − salary − employer FICA
S-Corp savings = LLC total − S-Corp total

When is the S-Corp election actually worth it?

The classic rule of thumb is "S-corp makes sense above $80,000 of net profit" — but the truth depends on your state income tax, the salary you can defensibly pay yourself, and your annual payroll service costs. This calculator gives you an honest number after all of those.

How the math works

As a default LLC (disregarded entity), 100% of your net profit is subject to 15.3% self-employment tax up to the Social Security wage base, plus ordinary income tax. Electing S-corp status splits the profit into (1) a W-2 salary that pays FICA, and (2) a distribution that does not.

The catch: you must pay yourself a "reasonable" salary per IRS rules, and you incur ~$800–$1,800/year in payroll service + extra tax return costs. Below roughly $40,000 of profit the costs usually exceed the savings.

Use this tool if…

  • You're a freelancer or consultant with $50k+ net profit considering S-corp.
  • Your CPA said "you should S-corp" and you want to verify the number.
  • You already S-corp and want to sanity-check your salary level.

What this tool does NOT include

State income tax differences, the QBI 20% deduction (Section 199A), health insurance deductions, or retirement plan contributions. Run those separately — rough savings here is typically within 10% of the final number once those are layered in.

Frequently Asked Questions

What counts as "reasonable salary" for S-corp owners?

The IRS requires S-corp owner-employees to pay themselves wages comparable to what similar businesses pay for similar work. Use BLS Occupational Employment Statistics (OES) by profession and state as your anchor. Common benchmarks: 40–60% of profit, OR market wage for your role — whichever is higher.

At what income does S-corp election usually make sense?

For most single-owner service businesses, S-corp savings exceed the administrative costs somewhere between $40,000 and $80,000 of net profit. Use this calculator with YOUR specific numbers — not a rule of thumb.

What are the ongoing costs of S-corp election?

Expect $800–$1,800/year for a payroll service (Gusto, ADP, QuickBooks Payroll) plus ~$500–$1,500 more for your tax return (Form 1120-S + K-1). Your state may also charge a separate S-corp franchise or minimum tax.

Does this calculator include the QBI 20% deduction?

No. The QBI/Section 199A deduction is a separate calculation that applies to both LLC and S-corp income (though different limits). Section 199A is scheduled to sunset December 31, 2025 unless Congress extends it — check current status before relying on it.

Can I switch from LLC to S-corp mid-year?

Yes. File IRS Form 2553 within 2 months and 15 days of the tax year you want the election to take effect. Most accountants recommend starting January 1 for the cleanest books.