S-Corp vs LLC Tax Calculator: Side-by-Side Comparison at Every Income Level
Compare S-Corp vs LLC taxes at $75K, $150K, and $300K net income. See self-employment tax savings, costs, and the breakeven point.
An S-Corp election can save a self-employed person $1,200-$8,700+ per year in payroll taxes compared to a standard LLC, depending on net profit and reasonable salary. The breakeven is typically $50K-$60K in consistent net profit. Below are side-by-side calculations at $75K, $150K, and $300K.
Key Takeaways
- LLCs (sole prop) pay 15.3% self-employment tax on all net profit. S-Corps pay payroll tax only on the owner's W-2 salary.
- The breakeven point is typically $50K-$60K+ in consistent net profit, after accounting for $2,000-$5,000/year in S-Corp compliance costs.
- At $150K net profit, an S-Corp saves roughly $4,400-$6,400/year after compliance costs.
- The Social Security wage base ($176,100 in 2025, $183,000 est. in 2026) caps the 12.4% portion, reducing S-Corp savings at very high incomes.
- The QBI deduction interacts with S-Corp salary — setting salary too high reduces your 20% QBI deduction.
The Core Tax Difference
Both structures pay the same federal income tax — all profit flows through to your personal 1040. The difference is in payroll and self-employment taxes:
| LLC (Sole Prop) | S-Corp | |
|---|---|---|
| SE/payroll tax base | All net profit (x 92.35%) | Only W-2 salary |
| SE/payroll rate | 15.3% (12.4% SS + 2.9% Medicare) | 15.3% on salary only |
| Distributions taxed? | N/A — all is SE income | No payroll tax on distributions |
| Filing | Schedule C on Form 1040 | Form 1120-S + K-1 + personal 1040 |
The Social Security portion (12.4%) applies up to the wage base: $176,100 in 2025 and an estimated $183,000 in 2026. Medicare (2.9%) has no cap, with an additional 0.9% above $200,000 single / $250,000 MFJ. For a full breakdown, see our FICA tax explained guide.
Worked Example: $75,000 Net Profit
A reasonable salary at this level is approximately $45,000.
LLC (Sole Proprietorship)
| Item | Amount |
|---|---|
| Net profit | $75,000 |
| SE tax base (92.35%) | $69,263 |
| Self-employment tax (15.3%) | $10,597 |
| Deductible half of SE tax | $5,299 |
S-Corp ($45,000 Salary)
| Item | Amount |
|---|---|
| Net profit | $75,000 |
| W-2 salary | $45,000 |
| Employer payroll tax (7.65%) | $3,443 |
| Employee payroll tax (7.65%) | $3,443 |
| Total payroll tax | $6,885 |
| Distribution | $26,558 ($75K - $45K - $3,443 employer tax) |
Savings at $75K
| LLC | S-Corp | Difference | |
|---|---|---|---|
| Payroll/SE tax | $10,597 | $6,885 | $3,712 saved |
| Compliance costs (est.) | $0 | -$2,500 | |
| Net annual savings | ~$1,200 |
At $75K, the S-Corp election saves money, but the margin is thin. If your income fluctuates below $60K some years, the compliance costs could eat the savings. For more on when the LLC default is the better choice, see our S-Corp vs LLC tax comparison.
Worked Example: $150,000 Net Profit
A reasonable salary at this level is approximately $70,000.
LLC (Sole Proprietorship)
| Item | Amount |
|---|---|
| Net profit | $150,000 |
| SE tax base (92.35%) | $138,525 |
| Self-employment tax (15.3%) | $21,194 |
| Deductible half of SE tax | $10,597 |
S-Corp ($70,000 Salary)
| Item | Amount |
|---|---|
| Net profit | $150,000 |
| W-2 salary | $70,000 |
| Employer payroll tax (7.65%) | $5,355 |
| Employee payroll tax (7.65%) | $5,355 |
| Total payroll tax | $10,710 |
| Distribution | $74,645 ($150K - $70K - $5,355 employer tax) |
Savings at $150K
| LLC | S-Corp | Difference | |
|---|---|---|---|
| Payroll/SE tax | $21,194 | $10,710 | $10,484 saved |
| Compliance costs (est.) | $0 | -$4,000 | |
| Net annual savings | ~$6,400 |
This is where the S-Corp election starts delivering significant value. The $6,400 in annual savings compounds over time and can be redirected into retirement accounts like a Solo 401(k) for even more tax deferral.
Worked Example: $300,000 Net Profit
A reasonable salary at this level is approximately $110,000.
LLC (Sole Proprietorship)
| Item | Amount |
|---|---|
| Net profit | $300,000 |
| SE tax base (92.35%) | $277,050 |
| SS tax (12.4% on first $176,100) | $21,836 |
| Medicare (2.9% on $277,050) | $8,034 |
| Additional Medicare (0.9% on excess over $200K AGI) | ~$693 |
| Total SE tax | $30,563 |
S-Corp ($110,000 Salary)
| Item | Amount |
|---|---|
| Net profit | $300,000 |
| W-2 salary | $110,000 |
| Employer SS + Medicare (7.65%) | $8,415 |
| Employee SS + Medicare (7.65%) | $8,415 |
| Total payroll tax | $16,830 |
| Distribution | $181,585 ($300K - $110K - $8,415 employer tax) |
Savings at $300K
| LLC | S-Corp | Difference | |
|---|---|---|---|
| Payroll/SE tax | $30,563 | $16,830 | $13,733 saved |
| Compliance costs (est.) | $0 | -$5,000 | |
| Net annual savings | ~$8,700 |
At $300K, the savings are substantial. Note that at incomes above the Social Security wage base ($176,100 in 2025), only the Medicare portion (2.9% + 0.9%) applies to additional income, which slightly narrows the S-Corp advantage on dollars above the cap.
The QBI Deduction Interaction
Both LLCs and S-Corps can qualify for the Section 199A QBI deduction — up to 20% of qualified business income. However, the QBI calculation differs:
- LLC: QBI = net profit minus half of SE tax
- S-Corp: QBI = net profit minus W-2 salary
Setting your S-Corp salary higher reduces payroll tax savings but also reduces your QBI deduction. The optimal salary balances both effects.
| At $150K Profit | LLC | S-Corp ($70K salary) |
|---|---|---|
| QBI base | $139,403 | $80,000 |
| QBI deduction (20%) | $27,881 | $16,000 |
| Income tax savings (24%) | $6,691 | $3,840 |
| QBI difference | -$2,851 |
The LLC gets a larger QBI deduction, but the S-Corp’s payroll tax savings ($10,484) far exceed the QBI difference ($2,851). At $150K, the S-Corp still wins by a wide margin.
For service businesses (law, consulting, accounting), the QBI deduction phases out starting at $197,300 (single) / $394,600 (MFJ) in 2026. See our QBI deduction and S-Corp optimization guide for phase-out details.
Reasonable Compensation Rules
The IRS requires S-Corp owners to pay themselves a “reasonable salary” before taking distributions. Setting the salary too low triggers audit risk. Factors the IRS considers:
- Industry salary data for your role and experience
- Hours worked in the business
- Revenue and profitability of the business
- Comparable compensation in your geographic area
A common rule of thumb is to set salary at 40-60% of net profit, but always support it with market data. For a deep dive, see our S-Corp reasonable compensation guide.
S-Corp Compliance Costs
| Item | Typical Annual Cost |
|---|---|
| Payroll service (Gusto, ADP, etc.) | $500 – $1,500 |
| Form 1120-S preparation | $1,000 – $3,000 |
| State franchise tax / filing fees | $0 – $800+ |
| Bookkeeping (if not already doing it) | $1,200 – $3,600 |
Realistic total: $2,000-$5,000/year in additional costs vs. a Schedule C filing. These costs must be subtracted from the payroll tax savings to determine your true net benefit.
The Breakeven Decision Framework
- Is net profit consistently above $50,000-$60,000? If no, stick with the LLC default.
- Can you justify a salary meaningfully below net profit? If salary must be 80%+ of profit, savings are minimal.
- Are you already paying for bookkeeping and tax prep? Incremental S-Corp costs are lower if you already have a CPA.
- Is your income stable year to year? Fluctuating income means some years the S-Corp costs exceed savings.
- What are your state fees? States like California charge $800+ minimum franchise tax regardless of structure.
For a full comparison of business structures beyond LLC vs S-Corp, see our best business structure for taxes guide.
How to Make the S-Corp Election
File Form 2553 with the IRS by March 15 (for calendar-year filers) to elect S-Corp treatment for the current year. You do not need to form a new entity — your LLC simply changes its federal tax classification. Set up payroll, determine reasonable compensation, and begin paying W-2 wages on a regular schedule.
For more on S-Corp tax strategies beyond the election itself, see our S-Corp tax strategies guide.
How sharper.tax Helps
sharper.tax models the S-Corp election against your current LLC structure using your actual tax return numbers. We calculate the payroll tax savings, factor in the QBI deduction interaction, and estimate compliance costs so you see the true net benefit at your specific income level. The tax code is complicated, but better tools have leveled the field.
Sources
- IRS: S Corporations
- IRS Form 2553 Instructions (S Corporation Election)
- IRS: Self-Employment Tax
- IRS: Paying Yourself (S Corporation)
- IRS Revenue Procedure 2024-40 (2025 Wage Base and Limits)
The information above is educational and not tax advice.