LLC vs S-Corp Tax Savings Calculator
Compare total tax liability as an LLC (sole proprietorship) versus S-Corp. See your annual savings, 5-year projection, and break-even salary level.
$150,000
$
$70,000
$
IRS requires a 'reasonable salary'. Typically 40โ60% of net profit.
Annual S-Corp Tax Savings
$5,441
5-year projected savings: $27,205
LLC (Sole Prop)
SE Tax$21,194
Federal Income Tax$22,704
State Income Tax$13,950
Total Tax$57,848
Take-home Income$92,152
S-Corp
Payroll Tax (FICA)$10,710
Federal Income Tax$25,247
State Income Tax$13,950
Admin Cost (est.)$2,500
Total Tax + Admin$52,407
Take-home Income$97,593
This calculator provides estimates for educational purposes only. Consult a qualified tax professional for advice specific to your situation.
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Frequently Asked Questions
Generally, S-Corp makes sense when your net business profit exceeds $50,000โ$60,000 annually. Below that, the administrative costs ($1,500โ$3,000/year for payroll, tax returns, etc.) can outweigh the tax savings.
The IRS requires S-Corp owners to pay themselves a 'reasonable salary' before taking distributions. This is typically 40โ60% of net profit, benchmarked against what someone in a similar role would earn. Setting it too low invites IRS scrutiny.
With an LLC taxed as a sole prop, all net profit is subject to 15.3% self-employment tax. With an S-Corp, only your W-2 salary is subject to FICA (payroll tax). The remaining profit is passed through as distributions โ not subject to SE/FICA tax.
S-Corps require: payroll processing ($500โ$1,500/year), a separate corporate tax return Form 1120-S ($500โ$1,500), and possibly a registered agent fee. Total annual admin cost is typically $1,500โ$3,000.
You can elect S-Corp status by filing Form 2553 with the IRS. To be effective for the current year, it must be filed by March 15. Late elections are possible with reasonable cause. You don't need to change your LLC โ you're just changing the tax classification.