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.
Ready to build your next digital solution?
Send the brief and you get a scoped response with approach, milestones and a fixed price range. Not a sales call.
A 30-minute call with the engineer who would run your project
Within 2 business daysA written scope: approach, module breakdown, milestones, fixed price range
Within 5 business daysYou decide. No retainer, no obligation, and the scope document is yours to keep either way
Your timelineSend your brief
Three fields to start. Add project details if you have them.