S-Corp Tax Savings Calculator
Compare your self-employment tax as an LLC against payroll tax as an S-Corp and see your estimated net annual savings.
If your business earns more than you'd pay yourself in a reasonable salary, electing S-Corp status can cut your self-employment tax bill. As an LLC or sole proprietor, every dollar of net profit is hit with 15.3% self-employment tax. As an S-Corp, only your salary is subject to payroll tax — the rest comes out as distributions that avoid that 15.3%.
Enter your numbers below to see a side-by-side comparison and your estimated net annual savings after the added cost of running an S-Corp.
S-Corp Tax Savings Calculator
Updates live as you change any number.
Profit before paying yourself any owner salary or draw
What you'd pay someone to do your job — must be defensible
Payroll service + extra tax prep (default $2,500)
Estimated Net Annual Savings
after the $2,500 added cost of running an S-Corp
LLC / Sole Prop
Self-employment tax on full profit
As an S-Corp
Payroll tax on salary only
Distributions of $80,000 avoid the 15.3% self-employment tax that an LLC or sole proprietor would pay on that amount. This is a self-employment/payroll tax estimate only — it does not include income tax or the QBI deduction.
How the Math Works
LLC / Sole Prop:
SE income = Net profit × 0.9235
SE tax = min(SE income, $176,100) × 12.4% + SE income × 2.9%
S-Corp:
Payroll tax = min(Salary, $176,100) × 12.4% + Salary × 2.9%
Distributions = Net profit − Salary (no SE or payroll tax)
Savings:
Net savings = (SE tax − Payroll tax) − Added S-Corp cost
The self-employment tax rate is 15.3% — 12.4% for Social Security (capped at the wage base) plus 2.9% for Medicare (uncapped). An S-Corp lets you pay that tax only on your salary, while the remaining profit is distributed without it. The bigger the gap between your net profit and a reasonable salary, the larger the potential savings.
2025 Figures Used
Social Security wage base: $176,100
The 12.4% Social Security tax applies only up to this amount.
Social Security rate: 12.4%
Combined employer + employee portion.
Medicare rate: 2.9%
Combined employer + employee portion, with no wage cap.
SE income factor: 0.9235
Net profit is multiplied by 92.35% before self-employment tax.
Important — Read Before Acting on This
- This is an estimate, not tax advice or a guarantee of savings.
- It does not account for federal or state income tax, or the 20% QBI deduction — both of which can materially change the outcome.
- Your reasonable salary must be defensible — too low is an IRS audit red flag that can trigger back taxes and penalties.
- It excludes state-level S-Corp taxes/fees, unemployment taxes, and the cost of benefits like retirement contributions.
- Always consult a CPA before electing S-Corp status or setting your salary.
Want Us to Run Your Real Numbers?
We'll model your actual profit, set a defensible reasonable salary, handle the S-Corp election and payroll, and factor in income tax and the QBI deduction — so you know the real savings, not just an estimate.
Frequently Asked Questions
How does electing S-Corp status save on taxes?
As an LLC or sole proprietor, your entire net profit is subject to 15.3% self-employment tax (Social Security + Medicare). When you elect S-Corp status, you split your income into a reasonable salary — which is subject to payroll tax — and distributions, which are not subject to self-employment or payroll tax. The savings come from the distribution portion that escapes the 15.3% tax.
What is a 'reasonable' salary and why does it matter?
The IRS requires S-Corp owners who work in the business to pay themselves a reasonable salary — roughly what you'd pay someone else to do your job. Setting the salary too low to maximize distributions is a well-known audit red flag and can lead to back taxes and penalties. The salary must be defensible based on your role, industry, and hours worked.
Does this calculator account for income tax or the QBI deduction?
No. This tool only estimates the difference in self-employment and payroll tax between an LLC/sole prop and an S-Corp. It does not factor in federal or state income tax, the 20% Qualified Business Income (QBI) deduction, state-level S-Corp taxes or fees, or other deductions — all of which can change the real picture.
Is electing S-Corp status always worth it?
Not always. The savings have to outweigh the added cost of running payroll, filing a separate S-Corp return (Form 1120-S), and the extra bookkeeping. For many businesses that's worthwhile once net profit comfortably exceeds a reasonable salary, but the right answer depends on your specific numbers — which is why it's worth having a CPA run them.