US LLC vs. S-Corp Tax Savings Calculator
Estimate and compare potential tax implications for a US business owner choosing between LLC (taxed as sole proprietorship/partnership) and S-Corporation treatment. Provides an illustrative monetary result based on the input amount; see methodology and interpretation for details, caveats and sources.
- Page updated:
- Jun 10, 2026
- Tool version:
- v1.2.0
Overview
Compare the payroll-tax cost of running your business as a default LLC (taxed as a sole proprietorship/partnership) versus electing S-corporation status. As an LLC, your entire net profit is subject to 15.3% self-employment tax; as an S-corp, only your reasonable salary is subject to FICA, and the remaining profit is taken as distributions free of payroll tax.
Educational estimate, not tax advice. S-corp status adds payroll, accounting and compliance costs and requires a defensibly 'reasonable' salary. Consult a CPA before electing.
Results
Self-employment tax as an LLC
$16,955.46
Payroll (FICA) tax as an S-corp
$9,180.00
Profit taken as distributions (no FICA)
$60,000.00
Estimated payroll-tax savings
$7,775.46
Savings as % of net profit
6.5
How to read the result
- What it means
- The displayed value is an estimate based on your inputs. It represents the calculated scenario under current assumptions, not a guaranteed amount.
- Calculation limits
- The model uses simplified formulas and cannot account for all variables in your specific case (local regulations, personal conditions, temporal changes).
- Next step
- Use the result as a starting point. Adjust parameters to compare scenarios and validate with a professional when needed.
Glossary+−
- Self-Employment Tax
The 15.3% Social Security (12.4%) and Medicare (2.9%) tax paid by self-employed individuals on 92.35% of net earnings.
- Reasonable Salary
The W-2 wage an S-corp owner-employee must pay themselves for services rendered, as required by the IRS.
- Distribution
A payment of S-corp profit to an owner that is not subject to Social Security or Medicare tax.
- Social Security Wage Base
The annual earnings cap above which the 12.4% Social Security tax no longer applies ($176,100 in 2025).
- FICA
Federal Insurance Contributions Act tax — the combined 15.3% Social Security and Medicare tax on wages.
Key takeaways
Enter net profit, a reasonable salary and the Social Security wage base to compare LLC self-employment tax with S-corp FICA tax and see the estimated payroll-tax savings.
Estimate only — excludes income tax, Additional Medicare Tax, QBI, state taxes and S-corp administrative costs. Confirm with a CPA before electing S-corp status.
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Worked examples
Example: $120,000 profit, $60,000 salary (2025)
A consultant nets $120,000 and would pay herself a $60,000 reasonable salary as an S-corp.
Interpretation
Electing S-corp status saves about $7,775 in payroll tax here, before subtracting the added cost of running payroll and filing an 1120-S — often $1,000–$2,000+/year.
Frequently asked questions
How does an S-corp election save payroll tax?
Only your W-2 salary is subject to 15.3% FICA. Profit taken as distributions avoids Social Security and Medicare tax, whereas an LLC pays self-employment tax on all net profit.
What is a 'reasonable salary'?
The IRS requires S-corp owner-employees to pay themselves a salary that is reasonable for the work performed. Setting it artificially low to dodge payroll tax risks reclassification, back taxes and penalties.
Does this include the cost of being an S-corp?
No. S-corp status adds payroll processing, a separate 1120-S return and bookkeeping — frequently $1,000–$2,000+ per year — which can offset the savings at lower profit levels.
Are income taxes included?
No. This compares payroll/self-employment tax only. It excludes federal/state income tax, the 0.9% Additional Medicare Tax, the SE-tax deduction and the 20% QBI deduction, all of which affect the full picture.
Sources & references
- IRS — Self-Employment Tax (Social Security and Medicare Taxes): https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
- IRS — S Corporations: https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations
- IRS — Wage Compensation for S Corporation Officers: https://www.irs.gov/pub/irs-news/fs-08-25.pdf
- Social Security Administration — Contribution and Benefit Base: https://www.ssa.gov/oact/cola/cbb.html
Quality & oversight
- Author
- Ugo Candido, MBA
- Maintained by
- Ugo Candido, MBA
- Page updated
- Jun 10, 2026
- Tool version
- v1.2.0