LLC vs S-Corp Tax Calculator
Side-by-side comparison of LLC self-employment tax vs S-Corp salary and distributions. Find your breakeven point and net savings.
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Quick:
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Typically 40β60% of net profit
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Payroll service + 1120-S filing (est. $1,500β$3,000)
LLC (Default)
$16,955
SE Tax
$16,955
Total Extra Tax
S-Corp
$7,650
FICA on Salary
$9,650
FICA + Compliance
$7,305
Net Annual Savings (S-Corp)
$9,305
Gross SE Tax Savings
$66,200
S-Corp Distributions
3.3 mo
Break-Even (months)
Side-by-Side Comparison
| Tax Component | LLC | S-Corp | Difference |
|---|---|---|---|
| SE Tax / FICA (both sides) | $16,955 | $7,650 | -$9,305 |
| Compliance costs | $0 | $2,000 | +$2,000 |
| Net payroll/SE tax burden | $16,955 | $9,650 | -$7,305 |
| Annual Net Savings with S-Corp | β | $7,305 | |
LLC vs S-Corp Tax Strategy
The core difference: LLCs pay self-employment tax (15.3%) on all net profit. S-Corps pay FICA only on the owner-employee salary. Distributions from an S-Corp are not subject to SE/payroll taxes.
Formula
LLC SE Tax = Net Profit Γ 92.35% Γ 15.3%
S-Corp FICA = Salary Γ 15.3% (both sides combined)
Gross Savings = LLC SE Tax - S-Corp FICA
Net Savings = Gross Savings - Annual Compliance Costs
S-Corp FICA = Salary Γ 15.3% (both sides combined)
Gross Savings = LLC SE Tax - S-Corp FICA
Net Savings = Gross Savings - Annual Compliance Costs
Example
$120K profit, $50K salary, $2K compliance:
LLC SE Tax = $120K Γ 92.35% Γ 15.3% = $16,955
S-Corp FICA = $50K Γ 15.3% = $7,650
Gross Savings = $9,305 | Net Savings = $9,305 - $2,000 = $7,305/year
LLC SE Tax = $120K Γ 92.35% Γ 15.3% = $16,955
S-Corp FICA = $50K Γ 15.3% = $7,650
Gross Savings = $9,305 | Net Savings = $9,305 - $2,000 = $7,305/year
Extended
Breakeven Income Level
Find the exact income where S-Corp election starts saving you money after compliance costs
S-Corp Breakeven Income Level
At what profit level does S-Corp save more than compliance costs? Assumes 40% salary ratio and $2K compliance cost.
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| Business Profit | SE Tax Savings | Net After Compliance | Worth It? |
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Frequently Asked Questions
At what income level does S-Corp become beneficial?
The S-Corp election typically becomes beneficial around $40,000β$50,000 in annual net profit. Below this, the annual compliance costs ($1,500β$3,000) often exceed the SE tax savings.
What are the compliance costs of an S-Corp?
S-Corps require separate payroll processing, quarterly Form 941 filings, annual W-2s and Form 1120-S. Estimated additional costs: payroll service ($500β$1,500/year), CPA for 1120-S ($500β$2,000/year).
Does an LLC pay both employee and employer FICA?
An LLC member pays self-employment tax which covers both the employee (7.65%) and employer (7.65%) portions of FICA, for a total of 15.3%. An S-Corp owner only pays the combined 15.3% on their salary amount, not on distributions.
What happens to S-Corp savings at the Social Security wage base?
Social Security tax (6.2% Γ 2 = 12.4%) only applies to wages up to the annual wage base ($168,600 in 2024). Above this amount, only Medicare (2.9%) continues. This means SE tax savings grow more slowly above the wage base.
Can I switch from LLC to S-Corp during the year?
You can elect S-Corp status at any time during the year for it to take effect from that date, or you can elect by March 15 of the tax year for it to be retroactive to January 1. Consult a tax professional for timing.