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
Comparison Result
Your annual tax savings
$0.00
0% less taxes with S-Corp
Sole Proprietor / Single-Member LLC
Step A: Net Profit
Gross Income − Expenses
$0.00 − $0.00
Step B: Net Earnings Subject to SE Tax
Net Profit × 0.9235
$0.00 × 0.9235
Step C: Self-Employment Tax
SS + Medicare + Additional Medicare
Step D: Federal Income Tax
Progressive tax brackets on Net Profit
S-Corporation May Save Taxes
Step A: Employer Payroll Taxes on W-2 Wages
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
$0.00 − $0.00 − $0.00 − $0.00
Step C: Total Taxable Income
W-2 Wages + S-Corp Profit
$0.00 + $0.00
Step D: Federal Income Tax
Progressive tax brackets on Total Income
Step E: Employee Payroll Taxes (Display Only)
These are withheld from the owner's W-2 wages:
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
💡 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.
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