LLC vs S-Corp Tax Calculator

Compare your federal tax liability with step-by-step calculations showing how an S-Corporation can reduce your taxes by splitting income into salary (subject to payroll taxes) and distributions (not subject to payroll taxes).

Georgetown, Kentucky

Business Income

Gross Business Income Total revenue before expenses

Business Expenses (non-payroll) Operating costs excluding owner pay

Net Profit $0

Tax Filing Details

Filing Status

Tax Year

S-Corp Owner W-2 Wages

S-Corp Owner W-2 Wages IRS requires "reasonable compensation" - typically 40-60% of profit ℹ️

State Unemployment Rate (SUTA) Default 3% - varies by state and employer history

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Optional Deductions

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Your Annual Tax Savings

0% less taxes with S-Corp

Sole Proprietor / Single-Member LLC

Step A: Net Profit

Gross Income − Expenses

$150,000 − $50,000

Net Profit: $100,000

Step B: Net Earnings Subject to SE Tax

Net Profit × 0.9235

$100,000 × 0.9235

Net Earnings: $92,350

Step C: Self-Employment Tax

Social Security (12.4%) $11,451

Medicare (2.9%) $2,678

Additional Medicare (0.9%) $0

Step D: Total SE Tax

SS + Medicare + Additional Medicare

                                SE Tax:
                                $14,130
                            

Step E: Federal Income Tax

Progressive tax brackets on Net Profit

Federal Income Tax: $15,035

Step F: Total Sole Proprietor Tax

SE Tax + Federal Income Tax

TOTAL TAX: $29,165

S-Corporation

May Save Taxes

Step A: Employer Payroll Taxes on W-2 Wages

Social Security (6.2%) $4,960

Medicare (1.45%) $1,160

State Unemployment (SUTA) $2,400

Employer Payroll Taxes: $8,520

Note: S-Corp salary is subject to payroll taxes (FICA: Social Security and Medicare), NOT self-employment tax. Distributions are not subject to payroll taxes (Social Security and Medicare).

Step B: S-Corp Net Profit

Gross Income − Expenses − W-2 Wages − Employer Payroll Taxes

$150,000 − $50,000 − $80,000 − $8,520

S-Corp Profit (Owner Distribution): $11,480

Step C: Total Taxable Income

W-2 Wages + S-Corp Profit

$80,000 + $11,480

Total Taxable Income: $91,480

Step D: Federal Income Tax

Progressive tax brackets on Total Income

Federal Income Tax: $13,165

Step E: Employee Payroll Taxes (Display Only)

These are withheld from the owner's W-2 wages:

Employee SS (6.2%) $4,960

Employee Medicare (1.45%) $1,160

Total S-Corp Business + Owner Federal Tax

Employer Payroll + Federal Income Tax

                                TOTAL TAX:
                                $21,685
                            

Note: Employee payroll taxes are withheld from wages and included in income tax calculations. They do not represent an additional tax cost compared to sole proprietorship.

📊 Tax Comparison Summary

Sole Proprietor Total Tax $29,165

S-Corp Total Tax $21,685

                            Annual Tax Savings with S-Corp
                            $7,480
                        

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Why the S-Corp saves taxes

The tax savings come from avoiding payroll taxes on the distribution portion of income. In a sole proprietorship, 100% of profit is subject to self-employment tax. With an S-Corp, only the salary portion is subject to payroll taxes (FICA), while distributions are not subject to payroll taxes (Social Security and Medicare).

⚠️ Important Disclaimers

Reasonable Salary: The IRS requires S-Corp owners to pay themselves a "reasonable salary" comparable to what they would earn for similar work at another company. Salaries that are unreasonably low may be challenged by the IRS.
Owner Distributions: Owner distributions do not affect taxes in either structure. S-Corp distributions are not subject to payroll taxes (Social Security and Medicare).
Federal Only: This calculator shows federal taxes only. State income tax is excluded.
Consult a Professional: This calculator provides estimates only. Consult with a qualified tax professional for personalized advice.