{
  "slug": "s-corp-vs-llc-tax-savings-calculator",
  "title": "S-Corp vs LLC Tax Savings Calculator",
  "heading": "S-Corp Election Tax Savings Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/s-corp-vs-llc-tax-savings-calculator",
  "summary": "Self-employment tax saved by an S-corp election, net of payroll and filing costs.",
  "description": "The S-corporation election saves money in exactly one way for most small businesses: profit distributed to the owner beyond a reasonable salary escapes the 15.3% self-employment tax that applies to all of a sole proprietor's or default-LLC's net earnings. Against that saving sit real costs — running payroll, filing a separate 1120-S return, state payroll registrations, and in some states an additional entity-level tax. This calculator computes self-employment tax under the default treatment, computes payroll taxes on the salary you set under the S-corp treatment, subtracts the compliance costs, and reports the net annual saving plus the profit level at which the election starts paying for itself. The salary you choose must be reasonable compensation for the work performed; setting it artificially low is the most commonly audited aspect of S-corp treatment, so model a defensible figure rather than the smallest number that maximises the output.",
  "formula": "Default SE Tax = Net Profit × 92.35% × 15.3% (Medicare uncapped). S-Corp = Salary × 15.3% + Compliance Cost. Saving = Difference.",
  "dateModified": "2026-09-06",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=s-corp-vs-llc-tax-savings-calculator",
  "inputs": [
    {
      "id": "profit",
      "label": "Net business profit",
      "kind": "number",
      "hint": null,
      "default": 140000,
      "unit": "$",
      "min": 10000,
      "max": 2000000
    },
    {
      "id": "salary",
      "label": "Reasonable salary you'd pay yourself",
      "kind": "number",
      "hint": null,
      "default": 70000,
      "unit": "$",
      "min": 0,
      "max": 1000000
    },
    {
      "id": "payrollCost",
      "label": "Payroll service",
      "kind": "number",
      "hint": null,
      "default": 720,
      "unit": "$/year",
      "min": 0,
      "max": 5000
    },
    {
      "id": "taxPrep",
      "label": "Extra tax prep (1120-S)",
      "kind": "number",
      "hint": null,
      "default": 1200,
      "unit": "$/year",
      "min": 0,
      "max": 8000
    },
    {
      "id": "stateEntityTax",
      "label": "State entity / franchise tax",
      "kind": "number",
      "hint": null,
      "default": 0,
      "unit": "$/year",
      "min": 0,
      "max": 5000
    },
    {
      "id": "ssWageBase",
      "label": "Social Security wage base",
      "kind": "number",
      "hint": null,
      "default": 176100,
      "unit": "$",
      "min": 100000,
      "max": 300000
    }
  ],
  "outputs": [
    {
      "id": "saving",
      "label": "Net annual saving from S-corp election",
      "format": "currency",
      "hint": null,
      "primary": true
    },
    {
      "id": "defaultTax",
      "label": "Self-employment tax as an LLC",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "corpTotal",
      "label": "Payroll tax + compliance as S-corp",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "distributions",
      "label": "Profit taken as distributions",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "compliance",
      "label": "Annual compliance cost",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "breakEvenProfit",
      "label": "Profit where the election breaks even",
      "format": "currency",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Net business profit: 140000 $",
      "Reasonable salary you'd pay yourself: 70000 $",
      "Payroll service: 720 $/year",
      "Extra tax prep (1120-S): 1200 $/year",
      "State entity / franchise tax: 0 $/year",
      "Social Security wage base: 176100 $"
    ],
    "outputs": [
      "Net annual saving from S-corp election: $7,151",
      "Self-employment tax as an LLC: $19,781",
      "Payroll tax + compliance as S-corp: $12,630",
      "Profit taken as distributions: $70,000",
      "Annual compliance cost: $1,920",
      "Profit where the election breaks even: $82,549"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter net business profit ($).",
      "Enter reasonable salary you'd pay yourself ($).",
      "Enter payroll service ($/year).",
      "Enter extra tax prep (1120-s) ($/year).",
      "Enter state entity / franchise tax ($/year).",
      "Enter social security wage base ($).",
      "Read your net annual saving from s-corp election on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "profit": 85000,
        "salary": 40000,
        "payrollCost": 420,
        "taxPrep": 700,
        "stateEntityTax": 0,
        "ssWageBase": 105700
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "profit": 140000,
        "salary": 70000,
        "payrollCost": 720,
        "taxPrep": 1200,
        "stateEntityTax": 0,
        "ssWageBase": 176100
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "profit": 225000,
        "salary": 110000,
        "payrollCost": 1140,
        "taxPrep": 1900,
        "stateEntityTax": 0,
        "ssWageBase": 281800
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "What counts as a reasonable salary?",
      "a": "What you would have to pay someone else to do your job, supported by industry survey data, hours worked, and the role's responsibilities. The IRS challenges low salaries paired with large distributions, so document how you arrived at the figure."
    },
    {
      "q": "Does an S-corp reduce income tax?",
      "a": "No. Profit still flows to your personal return either way. The election only changes how much of that profit is exposed to Social Security and Medicare tax."
    },
    {
      "q": "Does a lower salary reduce my Social Security benefit?",
      "a": "Yes, eventually. Benefits are computed from your earnings record, so years of a minimal salary shrink your future benefit. That trade-off is not captured in the dollar saving above."
    },
    {
      "q": "Are there states where this backfires?",
      "a": "Some states impose an entity-level tax or franchise fee on S-corps, and a few do not recognise the federal election. Enter that cost in the state entity tax field before deciding."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/llc-formation-cost-calculator",
    "https://www.revenuelab.fyi/toolbox/quarterly-estimated-tax-calculator"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — S-Corp vs LLC Tax Savings Calculator (https://www.revenuelab.fyi/toolbox/s-corp-vs-llc-tax-savings-calculator)"
}