S corp vs LLC tax savings calculator: what the election is worth on your numbers

By Jonathan Solomon, Founder of LucaLedger. Last updated September 2026. Rates and limits are the 2026 figures from the IRS sources at the bottom.

The short answer As a sole proprietor or single-member LLC you pay self-employment tax on almost all of the profit. As an S corporation you pay payroll taxes only on a reasonable salary; the rest comes out as a distribution with no Social Security or Medicare tax. The saving is real but smaller than the headline, because the S corp adds payroll and return costs, often shrinks the QBI deduction, and the salary has to be defensible. Enter your figures and see the net.

Enter net profit and a salary to compare.

What the calculator counts

LLC or sole proprietor: self-employment tax at 12.4 percent Social Security up to $184,500 and 2.9 percent Medicare on 92.35 percent of net profit, plus 0.9 percent Additional Medicare over the threshold; half of the SE tax deducted at your marginal rate.
S corp: employee and employer Social Security and Medicare on the salary (the employer half is deductible to the corporation), federal unemployment tax of $42, your state unemployment figure, and the added yearly costs you enter.
QBI: 20 percent of net profit less half the SE tax as an LLC, against 20 percent of the profit that remains after salary and employer payroll taxes as an S corp, both valued at your marginal rate. Only for taxable income below the threshold; above it the wage and property limits change the answer and a preparer should run it.

What it leaves out

State income tax differences, pass-through entity taxes and franchise fees beyond what you enter, retirement plan contribution limits that depend on salary, health insurance treatment for a more-than-2-percent shareholder, the accumulated adjustments account, and the cost of your own time running payroll. It also assumes the salary you enter is reasonable; if it is not, the IRS can reclassify distributions as wages and the saving disappears with penalties on top.

Frequently asked questions

How much does an S corp save on taxes?

The saving is the self-employment tax on the part of the profit that becomes a distribution instead of salary, minus the payroll taxes on the salary, minus the costs the S corp adds: payroll processing, a separate 1120-S return, state fees, and often a smaller QBI deduction. For many owners the break-even is somewhere between $50,000 and $80,000 of net profit; the calculator shows where it falls for your numbers.

What is a reasonable salary for an S corp?

What you would have to pay someone else to do the work you do for the corporation, judged on the IRS factors: training and experience, duties, time devoted, what comparable businesses pay. The IRS can reclassify distributions as wages when the salary is too low. The reasonable salary calculator on this site walks through the factors.

Does an S corp reduce the QBI deduction?

Usually. Salary paid to the owner is not qualified business income, so the 20 percent deduction is taken on a smaller base than the sole proprietor's net profit. Above the taxable-income threshold ($201,750 single, $403,500 joint for 2026) the W-2 wage limitation can cut the other way. The calculator shows the QBI effect for incomes below the threshold.

Is self-employment tax really 15.3 percent?

On 92.35 percent of net profit, up to the Social Security wage base ($184,500 for 2026); above it only the 2.9 percent Medicare part applies, plus 0.9 percent Additional Medicare over $200,000 ($250,000 joint). Half of the self-employment tax is deductible, which the calculator values at your marginal rate.

When does an S corp not make sense?

When net profit is low enough that the fixed costs exceed the payroll-tax saving, when a reasonable salary would take most of the profit, when the state charges an entity-level tax or franchise fee that eats the saving, and when the owner wants to maximize retirement contributions that depend on a high salary.

Sources

IRS Topic 751, Social Security and Medicare withholding rates (page last reviewed January 20, 2026): 6.2 and 1.45 percent each side, the 0.9 percent Additional Medicare tax over $200,000, and the 2026 wage base of $184,500.
2026 Form 1040-ES: the 92.35 percent factor and the Social Security maximum on the self-employment tax worksheet.
Rev. Proc. 2025-32, section .26: 2026 QBI threshold amounts ($201,750; $403,500 joint; $201,775 married filing separately).
IRS, S corporation compensation and medical insurance issues: the reasonable compensation factors and the authority to reclassify distributions.
IRS Topic 759, Form 940: the 0.6 percent effective FUTA rate on the first $7,000 of wages after the state credit.

General information, not tax advice. The comparison is federal only and assumes the salary is reasonable. Run the real numbers with your accountant before electing.