Free tool
S-Corp Savings Estimator
The S-Corp election can save thousands in self-employment tax once you cross the breakeven — and cost you money below it. See exactly where you land.
An S-Corp election saves money by exempting the distribution portion of LLC profit from 15.3% self-employment tax. The catch: you must pay yourself a "reasonable" W-2 salary (FICA still applies) and add $1,500–$3,000/year in payroll + admin cost. Breakeven typically lands at $40,000–$60,000 of net profit after salary. Below that, electing S-Corp costs you money. At $100k net profit, typical savings are $5,000–$8,000/year. Non-residents cannot elect S-Corp — all shareholders must be US citizens or resident aliens.
S-Corp Savings Estimator
Compare default LLC pass-through taxation against an S-Corporation election. The S-Corp split between salary (subject to FICA) and distributions (not subject to SE tax) can save thousands once net profit exceeds the breakeven.
Pass-through (Schedule C)
- SE tax$21,194
- Federal income tax$16,809
- State income tax$0
S-Corp election
- FICA on salary$9,891
- Federal income tax$21,407
- State income tax$0
Net profit $150,000 is above the breakeven ($80,616). An S-Corp election likely makes sense here — but factor in ~$1,500/yr payroll & extra return-prep costs.
Caveats and watch-outs
- "Reasonable salary" must be defensible — IRS audits S-Corps that pay artificially low salaries.
- An S-Corp election (Form 2553) must be filed within 2 months and 15 days of the tax year.
- S-Corp shareholders cannot be non-US residents.
- Payroll, unemployment insurance, and workers' comp add real annual costs (~$1,500-$3,000).
- State pass-through-entity (PTE) tax workarounds may further change the picture.
Frequently asked questions
When does an S-Corp election actually save money?
The savings come from skipping the 15.3% FICA on the distribution portion of your profit. You also take on $1,500–$3,000/year in payroll + admin cost. Crossover is typically $40,000–$60,000 of net profit (after a reasonable salary). Below the crossover, S-Corp costs more than it saves.
What counts as a "reasonable salary"?
The IRS requires the salary portion to match what you would pay a non-owner to do the same work. There is no statutory percentage, but case law and IRS guidance suggest using BLS wage data, comparable job postings, or industry surveys. Aggressively low salaries are a top S-Corp audit trigger.
Does the calculator include state income tax?
No. S-Corp election does not change federal vs state income tax much — the savings come from federal FICA. State income tax applies to both salary and distribution in most states. Use our LLC Tax Calculator for a full federal + state stack.
Can a non-resident form an S-Corp?
No. S-Corps require all shareholders to be US citizens or resident aliens. Non-residents own LLCs taxed as partnerships or disregarded entities — never S-Corps.
How do I elect S-Corp status?
File IRS Form 2553 within 75 days of formation (or by March 15 of the year you want the election to take effect). The election applies to federal tax only; some states require a separate state-level election. Late elections can sometimes be cured with Rev. Proc. 2013-30 relief.