LLC vs S-Corp Comparison Calculator Tax Year 2026
Compare your total tax as a sole proprietor / single-member LLC vs an S-Corp election. See how much you could save (or lose) after accounting for S-Corp costs.
Enter your net business income to see results
This calculator compares your total tax burden as a sole proprietor / single-member LLC vs an S-Corp election, including all additional costs.
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Side-by-Side Comparison
| Component | Sole Prop / LLC | S-Corp | Difference |
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How This Calculator Works
Self-Employment Tax vs Payroll Tax
As a sole proprietor or single-member LLC, you pay self-employment tax (15.3%) on all net earnings: 12.4% Social Security (capped at $184,500 for 2026) + 2.9% Medicare (uncapped). With an S-Corp, you split income into salary (subject to payroll tax) and distributions (not subject to payroll/SE tax). The S-Corp pays the employer half (7.65%) and withholds the employee half (7.65%) from your paycheck -- but distributions escape both halves.
Why QBI is Different for S-Corp
The Qualified Business Income (QBI) deduction under Section 199A allows a 20% deduction on qualified business income. For a sole proprietor, QBI = net profit minus half-SE, health insurance, and retirement contributions. For an S-Corp, QBI equals only the distribution portion (net income minus salary). Your W-2 salary from the S-Corp does NOT qualify for QBI. This means a higher salary reduces your QBI deduction -- an often-overlooked cost of S-Corp election that most calculators miss.
What "Reasonable Salary" Means
The IRS requires S-Corp owner-employees to pay themselves a "reasonable" salary before taking distributions. Factors include: comparable salaries for similar positions, your training and experience, time devoted to the business, and what you'd pay a non-owner to do the same work. The IRS has won multiple court cases (e.g., Watson v. Commissioner, Radtke v. United States) against shareholders paying unreasonably low salaries. There is no safe harbor percentage, but most CPAs advise 40-60% of net income as a starting point.
FUTA and SUTA
S-Corp wages are subject to Federal Unemployment Tax (FUTA): 6% on the first $7,000 of wages = $420/year. Most states provide a credit reducing the effective rate to 0.6% ($42), but new businesses or those without a state unemployment history may pay the full amount. State Unemployment Tax (SUTA) varies by state, industry, and claims history (typically $100-500/year for a single-employee S-Corp).
Why Break-Even Matters
At lower income levels, the S-Corp costs (payroll service, additional tax return, state fees, FUTA/SUTA) can exceed the payroll tax savings. The break-even point is the income level where savings first exceed costs. Below this point, an S-Corp costs more than it saves.