S-Corp Tax Savings Calculator
See exactly how much you could save in self-employment taxes by electing S-Corp status. This calculator compares your tax liability as an LLC vs S-Corp.
Enter Your Business Details
Your net business profit after expenses (before owner compensation)
The salary you'd pay yourself as an S-Corp employee (must be "reasonable" for your role)
Your Potential Savings
Enter your details and click "Calculate My Savings" to see your potential S-Corp tax savings.
Ready to Make the Switch to S-Corp?
The S-Corp election can save you thousands annually, but it requires proper setup and ongoing compliance. Our team handles everything, from the election to payroll to tax filings.
When Does an S-Corp Actually Save You Money?
An S-Corp election is one of the most common, and most misunderstood, tax moves for small business owners. The premise is simple: instead of paying 15.3% self-employment tax on every dollar of profit your LLC earns, you split your income between a W-2 salary (which is subject to payroll tax) and shareholder distributions (which are not). The distribution portion avoids self-employment tax entirely, which is where the savings come from.
The rule of thumb most CPAs use: S-Corp election typically starts making sense once your business nets more than $50,000 to $70,000 in profit after expenses. Below that threshold, the cost of running an S-Corp, payroll processing, separate tax return (Form 1120-S), state filing fees, and reasonable-compensation analysis, usually eats up the tax savings.
What "reasonable salary" actually means
The IRS requires S-Corp owner-employees to pay themselves a "reasonable salary" for the work they perform, you can't just take everything as a distribution. Reasonable means roughly what you'd pay an unrelated person to do your job. The IRS looks at industry norms, your geographic market, your experience, and the time you spend on the business. Setting your salary too low is one of the most common audit triggers for S-Corps.
LLC vs S-Corp: the key tradeoffs
- LLC (default): Simple. One tax return. All profit subject to 15.3% SE tax. Best for businesses under ~$50K profit.
- S-Corp election: Saves SE tax on distributions. Requires payroll, separate 1120-S return, and bookkeeping discipline. Best for profitable businesses where the owner is the primary worker.
- C-Corp: Rarely the right answer for small operators, double taxation usually wipes out any benefit unless you're raising venture capital.
What this calculator does, and doesn't, tell you
This tool estimates your federal self-employment tax savings based on the salary/distribution split you choose. It doesn't account for state-level S-Corp fees (California charges a 1.5% franchise tax on S-Corp income, for example), reasonable-compensation defensibility, payroll service costs, retirement contribution differences, or QBI deduction interactions. For a real S-Corp election decision, you want a CPA to model your specific situation, including whether late S-Corp election (Form 2553) is still available for the current tax year.
If you want WAYG to run the full analysis, including reasonable salary documentation, payroll setup, and the S-Corp election filing, that's included in our monthly subscriptions starting at $1,549/mo.
How S-Corp Tax Savings Work
Understanding why S-Corps save on self-employment taxes
LLC Taxation
As an LLC (default taxation), ALL your business profit is subject to 15.3% self-employment tax (Social Security + Medicare), plus income tax.
S-Corp Taxation
With S-Corp election, only your "reasonable salary" is subject to payroll taxes. The remaining profit is taken as distributions, avoiding SE tax.
The Savings
The difference between SE tax on all profit vs. payroll tax on just your salary is your annual savings, often $10,000-$20,000+ for profitable businesses.