Let's look at the difference between S Corp vs LLC tax calculator in terms of tax savings. Imagine you're a
consultant who has a net income of $120,000.
If you're taxed as an LLC (sole proprietor):
Self-employment tax: 15.3% of $120,000 = $18,360
Income tax (assumed at a 24% effective rate): 24% of $120,000 = $28,800
Total tax as an LLC: $18,360 (Self-Employment) + $28,800 (Income Tax) =
$47,160
If you're taxed as an S Corp:
Salary taxes (on $60,000 salary):
Payroll tax: approx. 7.65% = $4,590
Income tax (22% rate): 22% of $60,000 = $13,200
Distribution taxes (on $60,000 distribution): Income tax (22% rate): 22% of $60,000 = $13,200
Total S Corp tax estimator: $4,590 (Payroll tax) + $13,200 (Income tax on salary) + $13,200 (Income tax on distribution) =
$30,990
Comparison:
Total taxes paid as LLC: $47,160
Total taxes paid as an S Corp: $30,990
In this example, by choosing an S Corp, you could potentially save $16,170 in taxes.