S-Corp vs LLC Tax Calculator 2026
LLC (sole proprietor) vs S-corp for 2026: self-employment tax versus payroll tax on a reasonable salary, income tax with the QBI deduction under each, extra S-corp costs, the annual saving, salary sensitivity and the break-even profit for electing.
| As an LLC / sole proprietor — self-employment tax | — |
|---|---|
| LLC — federal income tax (after half-SE deduction and QBI) | — |
| LLC — total federal tax | — |
| As an S-corp — payroll taxes on salary | — |
| S-corp — federal income tax (salary + distribution, QBI on distribution) | — |
| S-corp — total federal tax + extra costs | — |
| Annual saving with the S-corp | — |
| QBI deduction comparison | — |
| Salary sensitivity | — |
| Break-even profit for an S-corp election | — |
In short
An S-corp saves self-employment tax by splitting profit into a reasonable W-2 salary (subject to 15.3% FICA) and distributions (no payroll tax), while an LLC taxed as a sole proprietorship pays 15.3% on all net earnings up to the $184,500 wage base. The saving is offset by payroll and filing costs, a smaller QBI deduction (salary is not QBI) and state entity taxes, so the election usually pays off above $60,000–80,000 of profit.
Who this is for: US sole proprietors and single-member LLC owners deciding whether to elect S-corp status.
LLC vs S-corp: where the saving comes from
- LLC / sole proprietor: all net profit is subject to 15.3% self-employment tax up to the $184,500 wage base (2.9% Medicare above, plus 0.9% above $200,000 / $250,000), then income tax after the half-SE deduction and the 20% QBI deduction.
- S-corp: you pay yourself a reasonable W-2 salary (7.65% + 7.65% FICA) and take the rest as a distribution with no payroll tax. The distribution still gets the QBI deduction; the salary does not.
- Costs: payroll processing ($500–1,500), a separate 1120-S return ($800–2,000), state fees, and administrative discipline (payroll runs, separate bank account, basis tracking).
- Reasonable salary: the IRS reclassifies distributions as wages when salary is unreasonably low; benchmark against what you would pay someone to do your job.
- Trade-offs: lower salary means lower Social Security credits and a smaller solo 401(k) employer base; S-corps cannot have foreign or entity shareholders and must allocate profit strictly by ownership.
Assumptions
- LLC: SE tax on 92.35% of profit (12.4% to $184,500 + 2.9% + 0.9% above thresholds); AGI = profit − half SE + other income; QBI = 20% of (profit − half SE) subject to the taxable-income limit and phase-in.
- S-corp: FICA on salary (employee + employer), distribution = profit − salary − employer FICA − extra costs; QBI on the distribution with salary counting as W-2 wages.
- Break-even scans profit from $20,000 using the lesser of your salary and 50% of profit; state income tax assumed equal under both.
Worked example
LLC: self-employment tax $21,194; after the $10,597 half-SE deduction and a $24,661 QBI deduction, income tax about $16,400 — total federal $37,600. S-corp: payroll tax on $70,000 = $10,710; distribution $72,145 after the employer FICA and costs; QBI deduction $14,429; income tax about $19,400 — total $32,600 including the $2,500 of costs. Saving about $5,000 a year. Raising the salary to $84,000 cuts the saving to about $2,400; at $56,000 it rises to about $7,600 — but the salary must be defensible.
Frequently asked questions
When is an S-corp worth it?
Usually once net profit passes about $60,000–80,000, when the payroll-tax saving on distributions clearly exceeds $2,000–4,000 of extra costs — the calculator finds the break-even for your numbers.
What is a reasonable salary for an S-corp owner?
What you would pay an employee for the same work — often 40–60% of profit for service businesses. Too low invites reclassification and penalties.
Does the S-corp election change my income tax?
Only indirectly: salary is excluded from the QBI deduction, so the 20% deduction shrinks. The main saving is payroll tax.
Can an LLC be taxed as an S-corp?
Yes — file Form 2553 (within 2 months and 15 days of the start of the year, or late with relief). The LLC stays an LLC legally.
Does an S-corp reduce Social Security benefits?
Slightly — only salary earns Social Security credits, so a lower salary means a lower benefit later; the calculator shows the trade-off through payroll tax.
Can a single-member LLC elect S-corp status?
Yes, with Form 2553 — the LLC remains an LLC for legal purposes and is taxed as an S corporation.
Related calculators
See all United States calculators → · All free online calculators
Found an error? Report it — tell us the inputs, the result you got, what you expected and the rule or source. Confirmed corrections are published within a week.