BI CFO / United States / S corp savings calculator
S corp savings calculator
Compare self-employment tax as an LLC with payroll tax on a reasonable salary as an S corporation.
Short answer: an S corp election usually starts saving tax once net profit is above roughly $40,000–$60,000, because only your reasonable salary bears 15.3% payroll tax. Extra payroll, filing and state costs reduce the saving.
Enter your figures to see the result.
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Ask an accountantWorked example: $140,000 profit, $70,000 salary
An LLC owner with $140,000 of profit considers an S corp election and a $70,000 salary.
| Self-employment tax as an LLC | $19,781 |
| Payroll tax on the salary | $10,710 |
| Extra running costs | $2,500 |
| Yearly saving | $6,571 |
Income tax is broadly unchanged; the saving is in self-employment tax.
Common questions
How does an S corp save tax?
Profit taken as salary bears payroll tax; profit taken as a distribution does not bear self-employment or payroll tax. The saving is the self-employment tax avoided on the distribution, less the costs of running payroll and filing Form 1120-S.
What is a reasonable salary?
What the business would pay someone else for the work you do, based on your role, hours and local pay. The IRS can reclassify distributions as wages if salary is too low.
When do I need to elect?
File Form 2553 within 2 months and 15 days of the start of the tax year the election should apply to, so by 15 March for a calendar-year business. Late election relief is often available.
Read the guide
For education only. Federal payroll and self-employment tax only; excludes state franchise taxes, unemployment taxes, QBI and income tax differences. Not tax advice.