Compare your LLC taxed as a sole proprietorship (default) vs LLC with S-Corp election. See how much self-employment tax the S-Corp structure saves you.
Net savings with S-Corp election
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Default LLC (sole prop) total tax
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LLC with S-Corp election total tax
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Payroll-tax difference
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S-Corp admin cost
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Your breakdown
Updates live as you type| Item | Default LLC | S-Corp election |
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The one tax an S-Corp actually saves
An LLC by itself is not a tax classification. A single-member LLC is a disregarded entity that lands on Schedule C, and a multi-member LLC files a partnership return on Form 1065. In both defaults, active business earnings generally enter the Schedule SE calculation. Schedule SE applies 12.4 percent Social Security tax up to the combined wage base and 2.9 percent Medicare tax without that ceiling, generally after multiplying net profit by 92.35 percent. Electing S-Corp status on Form 2553 changes only one thing that matters here: profit you take as a distribution rather than as W-2 salary is generally not subject to employment tax. Your salary still pays payroll tax, but the leftover profit does not. That single mechanism is the entire case for the election.
Why the breakeven varies
The Qualified Business Income deduction under Section 199A can narrow the gap. This model estimates a 20 percent QBI deduction on eligible business income, but does not model the W-2 wage, property, or specified-service limitations that can apply above the 2026 thresholds. It also treats employer payroll tax as a business expense and includes the admin cost you enter. Those moving pieces are why a generic profit threshold is unreliable.
A 180,000 dollar profit, single filer
To see the crossover, raise the profit input to $180,000 with an $80,000 reasonable salary and the default $1,500 of admin cost. Below is what the tool computes for a single filer in 2026, using the $184,500 Social Security wage base and the $16,100 standard deduction.
In this simplified example, default treatment produces about $46,286 of federal income and self-employment tax. The S-Corp estimate is about $39,699 including the $1,500 admin input, for estimated savings of $6,587. The S-Corp side includes $12,240 of employee-plus-employer payroll tax, a basic $18,776 QBI estimate on the $93,880 distribution, and $25,959 of income tax. State taxes, high-income QBI limitations, retirement-plan effects, and return-preparation details can change the result.
Reasonable salary is where audits live
The election only works if the IRS accepts your salary as reasonable for the services you perform. There is no bright-line percentage in the statute, and the IRS can reclassify nonwage distributions as wages when compensation for the shareholder's services is unreasonably low. A defensible approach is to anchor salary to what you would pay an employee to do the same work and keep the comparable-compensation evidence. Set the salary too low and you invite reclassification of distributions as wages, with back payroll taxes and penalties. Set it too high and you give back the very savings you elected for. The slider in this calculator lets you see how that tradeoff moves the net number in real time.
What does the admin cost actually cover?
An S-Corp has to run formal payroll, which means a payroll service of roughly $40 to $60 a month, quarterly Form 941 filings, year-end W-2 and W-3 forms, and a separate Form 1120-S corporate return that most owners pay a preparer to handle. The $1,500 default is a reasonable all-in estimate for a simple one-owner S-Corp. If your tax preparer charges more for the 1120-S, raise the input, because that cost comes straight off your savings.
Does the S-Corp election affect my retirement contributions?
Yes, and it can cut both ways. Employer retirement contributions to a Solo 401(k) or SEP are based on W-2 wages once you are an S-Corp, so a lower salary can shrink the maximum you are allowed to put away. A sole proprietor calculates the same limit off net earnings from self-employment. Before you set salary purely to minimize FICA, check how it caps your tax-advantaged retirement room, because losing deduction space can quietly erase the payroll-tax win.