S-Corp vs. LLC Tax Savings Calculator
Calculate whether electing S-Corporation tax status (IRS Form 2553) will lower your taxes. Compares self-employment tax savings against mandatory reasonable salary, payroll software, CPA filings, and state franchise fees.
Profit & State Profile
Gross annual business revenue minus all deductible operating business expenses.
No state income tax; franchise tax exempt under $2.47M revenue
Reasonable Salary Configuration
The IRS legally mandates that S-Corp shareholder-employees pay themselves a market-rate 'Reasonable Salary' before distributing dividends. Industry CPAs commonly recommend between 40% and 60% of net profits.
Additional Annual S-Corporation Overhead
Minimum annual net profit needed in this state to completely offset S-Corp maintenance costs:
Side-by-Side: Standard LLC vs. S-Corporation
| Financial Metric | Standard LLC (Schedule C) | LLC with S-Corp Election |
|---|---|---|
| Net Business Profit | $130,000 | $130,000 |
| Owner W-2 Wage Salary | $0 (100% Lucro) | $65,000 |
| Shareholder K-1 Profit Distributions | $0 | $65,000 |
| Self-Employment / FICA (15.3%) | $18,368 | $9,945 |
| Extra S-Corp Administrative Overhead | $0 | $2,200 |
| Net Cash Take-Home Pay | $111,632 | $117,855 |
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How it works
Enter your annual net business profit (gross revenue minus operating write-offs) and state of formation.
Set your Reasonable W-2 Compensation via percentage of profit or fixed annual dollar salary.
Review your net annual cash savings, state-specific breakeven threshold, and line-by-line financial comparison.
Frequently asked questions
How does an S-Corp election reduce self-employment taxes?
In a single-member LLC, 100% of net profits are subject to the 15.3% Self-Employment Tax. Under an S-Corp, FICA is only levied on your reasonable W-2 salary. Any additional profit distributed as a shareholder distribution (Schedule K-1) avoids the 15.3% FICA burden entirely.
What is the IRS Reasonable Salary requirement?
The IRS strictly enforces that shareholder-employees perform services for reasonable compensation comparable to industry benchmarks. Paying zero or artificially low W-2 salary to avoid payroll taxes can lead to severe IRS reclassification audits and back-tax penalties.
At what net profit level does an S-Corp make financial sense?
In most US states, the S-Corp election reaches financial breakeven around $60,000 to $80,000 in net profit. In higher-overhead states such as California (which mandates an $800 minimum franchise fee plus a 1.5% S-Corp net income tax), the breakeven threshold is typically between $75,000 and $85,000.
Is this tool free?
Yes. The site is supported by ads, so you never pay or need to create an account.
Does it work on mobile?
Yes. The page adapts to your screen and does not require installing any app.