Estimate the self-employment tax savings from electing S-corporation tax treatment for your LLC. Below the snapshot table you'll find the break-even income range and the payroll compliance cost that offsets the SE tax savings.
Use last year's Schedule C net income or your forecast for the current year. The calculator separates income into a 'reasonable salary' portion (still subject to payroll tax) and the remainder (distributions, free from SE tax).
IRS requires S-corp owners to pay themselves a 'reasonable salary' for the work they do. Rule of thumb: 40-60% of net income, calibrated to industry norms. Too-low salaries invite IRS reclassification.
We compute SE tax in the LLC default vs payroll tax in the S-corp scenario, subtract ~$1,500/year payroll compliance cost, and report net savings.
seBase = profit × 0.9235 (SE tax deduction)llcSE = min(seBase, $168,600) × 12.4% + seBase × 2.9% + max(0, seBase − $200,000) × 0.9%scorpFICA = min(salary, $168,600) × 12.4% + salary × 2.9% (+ 0.9% surtax above $200,000)netSavings = llcSE − scorpFICA − $1,500
2026 Social Security wage base: $168,600. Additional Medicare 0.9% above $200,000 single. Assumes ~$1,500/yr payroll compliance cost. IRS requires a "reasonable salary" — too low risks reclassification. Not tax advice; consult a CPA.
Static snapshot pulled from current state filing fees, statutes, and pricing data. Updates when source data changes.
| Net business income | SE tax (LLC default) | Reasonable salary (S-corp) | Payroll tax on salary | S-corp net savings | Recommendation |
|---|---|---|---|---|---|
| $30,000 | $4,239 | $22,500 | $3,179 | -$440 | Stay LLC default |
| $40,000 | $5,652 | $30,000 | $4,239 | -$87 | Stay LLC default (break-even) |
| $50,000 | $7,065 | $37,500 | $5,299 | $266 | Marginal — consider S-corp |
| $60,000 | $8,478 | $40,000 | $5,652 | $1,326 | Elect S-corp |
| $80,000 | $11,304 | $50,000 | $7,065 | $2,739 | Elect S-corp |
| $100,000 | $14,130 | $60,000 | $8,478 | $4,152 | Elect S-corp |
| $150,000 | $21,194 | $80,000 | $11,304 | $8,390 | Elect S-corp |
| $200,000 | $25,797 | $100,000 | $14,130 | $10,167 | Elect S-corp |
| $300,000 | $28,697 | $130,000 | $18,369 | $8,828 | Elect S-corp |
| $500,000 | $34,497 | $160,000 | $22,608 | $10,389 | Elect S-corp |
Assumes 15.3% SE tax up to $168,600 SS wage base + 2.9% Medicare above. S-corp scenario assumes ~$1,500/yr payroll compliance cost subtracted from gross SE savings. 'Reasonable salary' is a rule-of-thumb estimate; actual depends on industry, role, and locale per IRS reasonableness test. Not tax advice — consult a CPA.
Below $40,000 net income: stay LLC default — payroll compliance cost eats the SE tax savings. $40,000-$60,000: marginal — depends on industry, state, and how aggressive you can be on reasonable salary. Above $60,000: S-corp election usually pays off. Above $300,000: SE tax savings cap at the Social Security wage base, but Medicare savings continue.
The IRS scrutinizes S-corp owner salaries. Too low triggers reclassification of distributions as wages — recapturing all the SE tax savings plus penalties and interest. The 40-60% guideline is a starting point; calibrate against industry comparables (BLS data, RC Reports, similar).
File Form 2553 by March 15 to elect S-corp treatment for the current tax year. New entities have 75 days from formation. After election, the LLC files Form 1120-S annually and issues K-1s to members. Payroll must be set up — typically Gusto or ADP for $40-$80/month.
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