Free tool · 2026 figures
S-Corp vs LLC savings calculator
Most calculators show you the payroll tax you'd save and stop there. This one subtracts what the election actually costs to run — and tells you when the answer is no.
Inputs
Your numbers
Profit after all business expenses, before any owner salary.
Pre-filled at 60% — a starting point, not a rule.
Typical market rates for these services generally — not our fees.
Estimated annual saving
$3,869
On these numbers the election looks worthwhile. That is a payroll-tax figure — see the caveats below before acting on it.
How that's calculated
Payroll tax only — every line below is a payroll-tax figure.
- Self-employment tax as an LLC15.3% on $110,820 of net earnings
- $16,955
- Payroll tax as an S-corpBoth halves of FICA on a $72,000 salary
- −$11,016
- Payroll tax savedDistributions above your salary avoid payroll tax
- $5,939
- Added annual costPayroll service, 1120-S preparation, state fees
- −$2,070
- Net annual benefit
- $3,869
What this doesn't account for
- The QBI deduction. Paying yourself a salary reduces the qualified business income that the pass-through deduction applies to, which claws back part of the saving. How much depends on your total taxable income.
- Reasonable compensation. There is no 60% rule in the tax code. The IRS tests your salary against what the role would pay at arm’s length. Setting it too low is the most common way an election unravels on examination, with back taxes and penalties attached.
- Lower Social Security credit. A smaller reported wage today can mean a smaller benefit later.
- Your income tax. Distributions are still taxable income. This compares payroll tax only — it is not a total tax bill.
Want the version with your actual books?
We'll run this against your real numbers, model the QBI effect, and give you a defensible salary figure. Thirty minutes, no charge.
2026 figures. Social Security wage base $184,500. This is a planning estimate, not tax advice, and it does not create a client relationship. Have a professional confirm it before you file an election.
Questions
About the S-corp election
It depends on your salary level and cost assumptions, but for most single-owner businesses the crossover sits somewhere in the range of roughly $45,000 to $70,000 of net profit. Below that, the payroll service, the separate 1120-S return and the state fees typically cost more than the payroll tax you avoid. Move the sliders above and the calculator will show your own break-even point.
What the role would command at arm's length — measured against your duties, hours, experience and what comparable businesses pay for equivalent work. The widely repeated 60/40 split has no basis in the tax code; it is an internet heuristic. Paying yourself an unreasonably low salary to maximise distributions is the most common reason an election is challenged, and the consequence is back payroll taxes plus penalties.
Because most of them stop at the payroll tax saving and never subtract what the election costs to run. Adding a payroll service, a separate business return and state fees commonly comes to around $2,000 a year. A calculator that omits that is not measuring the decision you actually face.
Yes, and it works against the election. The qualified business income deduction applies to pass-through profit, and paying yourself a W-2 salary reduces the amount of profit that qualifies. This claws back part of the payroll tax saving — how much depends on your total taxable income and whether your business is a specified service trade. It is one of the main reasons to have the numbers modelled properly rather than relying on any calculator, including this one.
No — it is a tax election, not an entity type. An LLC or a corporation can elect to be taxed as an S-corp. For most small businesses this means keeping the LLC you already have and changing only how it is taxed, which is a much smaller change than people expect.
There are timing rules that determine whether an election takes effect for the current tax year or the next one, and relief is available in some late-election situations. If you are considering it, the timing is worth checking before the window closes rather than after.