Free tool · no signup
S-corp savings calculator
An S-corp election lets you pay yourself a salary and take the rest as distributions that escape self-employment tax. It also adds payroll, a separate return and stricter bookkeeping. The saving is real above a certain profit level and negative below it. Find your line.
- Built by a team of Certified Accountants, CPAs and Enrolled Agents
- 2026 figures
- Estimate only, not advice
Estimate only. Default LLC: self-employment tax at 15.3% on 92.35% of profit up to the 2026 wage base of $184,500 and 2.9% above. S-corp: 15.3% employer and employee payroll tax on salary up to the wage base, 2.9% above, and no self-employment tax on distributions. Income tax is broadly similar under both and is left out; the qualified business income deduction and state rules (California's 1.5% S-corp tax, Tennessee's excise tax, New York City) can change the answer.
Where the saving comes from
A default LLC owner pays self-employment tax on the whole profit: 15.3% on 92.35% of it, up to the wage base, then 2.9%. An S-corp splits the same profit in two. Salary goes through payroll and carries the same 15.3% (half from the company, half from the owner). Distributions carry none. Every dollar moved from salary to distribution saves roughly 15 cents until the wage base, and 2.9 cents above it.
The catch is the word "reasonable". The IRS requires the salary to be what you would pay a stranger to do your job. An owner who takes $20,000 of salary on $200,000 of profit is the textbook audit case, and the reclassification comes with back payroll tax, penalties and interest.
What the S-corp adds in cost and work
- Payroll, run at least monthly, with quarterly 941s, an annual 940 and W-2s: $500 to $1,200 a year for a payroll service, plus the time.
- A separate return, Form 1120-S with K-1s, due March 16, a month before the personal return.
- Stricter bookkeeping: the IRS expects a real balance sheet, and owner draws have to be booked as salary or distribution, not mixed.
- State fees and, in some states, an entity-level tax that eats the saving: California charges 1.5% of net income, New York City taxes S-corps as corporations, Tennessee applies its excise tax.
- Health insurance and retirement contributions follow different rules, which can be better or worse depending on the plan.
Where the line usually is
With the extra costs at $1,500 to $2,500 a year, the election starts paying at around $50,000 to $60,000 of profit above a reasonable salary. Below that, the admin costs more than the tax it saves, and the simplicity of a default LLC wins. Above roughly $150,000 the saving is several thousand dollars a year and grows with profit until the wage base, where it flattens.
Making the election
Form 2553, signed by all owners, filed within two months and 15 days of the start of the tax year it should apply to (March 16 for calendar-year 2026), or any time in the prior year. Late elections are routinely accepted with a reasonable-cause statement under Revenue Procedure 2013-30, so a missed date is usually fixable. Non-US persons cannot be S-corp shareholders, so the election is unavailable to most non-resident-owned LLCs.
Questions people ask
What is a reasonable salary?
What a comparable employee would earn for the same work, hours and location. Industry salary surveys, job listings and the business's own hiring costs are the usual evidence. There is no fixed percentage.
Does the S-corp change my income tax?
Not much. Salary and distributions are both taxed as ordinary income. The qualified business income deduction can be slightly smaller as an S-corp because it is calculated on profit after salary.
Can a single-member LLC become an S-corp?
Yes. The LLC stays an LLC legally and elects to be taxed as an S-corp with Form 2553 (and Form 8832 in some cases). No new entity is needed.
I am not a US resident. Can I elect S-corp status?
Generally no. S-corp shareholders must be US citizens or residents (or certain trusts and estates). A non-resident owner keeps the default LLC treatment or considers a C-corp.
When is it too late to elect for 2026?
The regular deadline for calendar-year 2026 was March 16, 2026. A late election with reasonable cause is still possible and usually accepted; we file it with the first 1120-S.
Will you run payroll and the 1120-S?
Yes. Payroll is included up to 10 employees on the Growth plan and above, and the 1120-S is prepared from the same books. We also review whether the election is worth it before you make it.
Want this handled instead?
Tell us the situation in two sentences. A Certified Accountant replies within 8 hours with a fixed quote: no hourly meter, no obligation.
Want this handled instead?
Tell us the basics. We reply within 8 hours, no obligation.