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Free Tax Tool · Updated for 2026
See the full picture. This calculator compares your total tax burden as an LLC vs S-Corp using 2026 rates: federal income tax, 15.3% self-employment tax, NJ state tax, the permanent QBI deduction (OBBBA), NJ BAIT election, and S-Corp compliance costs. Built by a NJ-licensed CPA for actual NJ business owners.
Adjust the inputs below. Results update instantly.
Your Schedule C or K-1 profit after all business expenses, before taxes.
Enter wages from other employers. They reduce the Social Security base available for SE tax and can produce an excess employee-SS credit, but they do not reduce this S-Corp's employer Social Security obligation.
Screening Tax Difference (LLC Minus S-Corp)
Under the inputs above, this screening model shows an LLC-minus-S-Corp tax difference of $2,038. Compensation support, omitted return items, and actual compliance costs can change the direction; this is not entity-selection advice.
SE tax base: For an ordinary nonfarm sole proprietor, Schedule C net profit x 92.35% produces Schedule SE line 4a before the remaining line 4c adjustments under IRC 1402(a)(12). Social Security (12.4%) is capped at the $184,500 wage base minus any W-2 wages. Medicare (2.9%) has no wage-base cap. Additional Medicare Tax (0.9%) uses the combined wage and self-employment thresholds under IRC 1401(b)(2).
S-Corp payroll:This employer pays 6.2% Social Security up to its own wage base, 1.45% Medicare, and modeled 0.6% FUTA on the first $7,000. The owner's employee Social Security is shown after the IRC 31(b) credit for excess withholding across employers; the employer amount is not reduced. Additional Medicare shows only the incremental surcharge caused by the modeled business wages. Employer payroll is deductible, reducing K-1 income.
QBI deduction: 20% of qualified business income per IRC 199A. For LLCs, QBI = net income minus half of SE tax. For S-Corps, QBI = K-1 income. SSTB phase-out begins at ~$202K single / ~$404K MFJ (OBBBA expanded ranges). W-2/UBIA limitation applies above the threshold for non-SSTBs.
Federal income tax: Applied using 2026 brackets (10/12/22/24/32/35/37%) per Rev. Proc. 2025-32. Standard deduction: $16,100 single, $32,200 MFJ, $24,150 HOH, $16,100 MFS.
NJ income tax: Applied using NJ GIT brackets (1.4% to 10.75%). NJ does not allow the SE tax deduction, the QBI deduction, or the federal standard deduction. NJ personal exemptions: $1,000 single / $2,000 MFJ.
BAIT: Entity-level NJ tax deductible on the S-Corp federal return per IRS Notice 2020-75, independent of your personal $40,400 SALT-cap position (OBBBA, IRC 164(b)(6)). The federal-tax effect is modeled by recomputing federal tax with K-1 income reduced by the BAIT payment, including the resulting QBI change - not as BAIT times a single marginal rate.
Compliance costs: $4,000/year estimated midpoint covering payroll service (~$1,200), incremental 1120-S prep (~$1,500), NJ CBT-100S minimum ($375-$1,500), NJ annual report ($75), and miscellaneous. Actual costs vary.
NIIT not modeled:The 3.8% Net Investment Income Tax (IRC § 1411) applies to investment income (capital gains, dividends, interest, passive activity income) when MAGI exceeds $200K Single/HoH / $250K MFJ / $125K MFS, not to W-2 wages or active S-Corp K-1 distributions for material participants. MAGI = AGI plus foreign earned income exclusion (typically MAGI = AGI for domestic-only taxpayers). If you have investment income alongside this business, your true tax liability may be higher than shown.
If separately accepted in writing, Monaco CPA can review a full-return tax comparison including BAIT, QBI effects, and NJ compliance costs. This written review does not include entity formation or election setup.
| Net Income | LLC Total Tax | S-Corp Total Tax | Modeled LLC Minus S-Corp Difference |
|---|---|---|---|
| $60,000 | $13,806 | $13,680 | $126 |
| $100,000 | $26,547 | $24,508 | $2,038 |
| $150,000 | $44,973 | $40,335 | $4,637 |
| $250,000 | $80,095 | $73,508 | $6,587 |
Static screening-model outputs using 2026 rates, single filer, no other W-2 income, a 45% salary input, BAIT enabled, and non-SSTB treatment. S-Corp total includes $4,000 annual compliance costs. The salary input is not a reasonable-compensation safe harbor. These are tax-difference examples before full-return effects, not projected full-return results or entity-selection advice. Use the contact form to request a written scope review.
An LLC taxed as a sole proprietorship (or disregarded entity) is simpler and cheaper to maintain. Whether it produces the lower total cost depends on the actual payroll- tax difference, QBI, filing status, other wages, and S-Corp compliance costs; no $60,000-to-$80,000 income band decides the answer by itself.
A sole proprietor's preliminary QBI base generally starts with net income minus allocable deductions such as half of SE tax; the taxable-income ceiling still applies. Below the threshold (~$202K single, ~$404K MFJ), the W-2 wage limitation generally does not apply. For S-Corps above the threshold, QBI is limited to the greater of 50% of W-2 wages or 25% of W-2 wages plus 2.5% of qualified property (UBIA). This means a sole prop with $150,000 in net income may actually get a larger QBI deduction than an S-Corp at the same income level.
If your income is variable (common for freelancers and content creators), the LLC structure avoids the risk of setting a salary too high in a down year. S-Corp owners must continue paying payroll taxes on their reasonable salary even when the business underperforms.
An S-Corp splits business income into W-2 reasonable compensation, which is subject to payroll taxes, and K-1 income, which generally is not. That can reduce gross payroll tax relative to Schedule SE, but the net difference does not equal 15.3% of every distribution dollar: the Social Security wage base, employer deductions, income tax, QBI, and compliance costs all change the comparison.
Under the displayed static assumptions, the screening model produces LLC-minus-S-Corp tax differences of $2,038 at $100,000, $4,637 at $150,000, and $6,587 at $250,000 after its $4,000 compliance-cost estimate. Those are model outputs before full-return effects, not income thresholds, promised full-return results, or entity-selection advice. Reasonable compensation and full-return facts can reduce, eliminate, or reverse the result.
Eligible S-Corps, partnerships, and multi-member LLCs may elect BAIT; sole proprietorships and disregarded single-member LLCs cannot. The entity payment may create a federal deduction whether the owner is below or above the individual SALT cap, but the federal bracket, QBI change, NJ member credit, deduction choice, and entity costs determine the actual effect.
The Section 199A QBI deduction (up to 20% of qualified business income) was made permanent by the One Big Beautiful Bill Act (OBBBA, P.L. 119-21, signed July 4, 2025). This deduction interacts with the LLC vs S-Corp decision in important ways.
For LLCs below the income threshold, QBI equals net income minus half of SE tax. There is no W-2 wage requirement. For S-Corps, QBI equals K-1 income (net income minus salary minus employer payroll taxes). A lower salary increases QBI but also increases IRS audit risk. Above the threshold, S-Corp QBI is limited by the W-2 wages the entity pays, which creates a natural floor on the salary.
For SSTBs (CPAs, lawyers, doctors, consultants, financial advisors), the QBI deduction phases out entirely between ~$202K and ~$277K single, or ~$404K and ~$554K MFJ. Once the deduction is fully phased out for the modeled activity, the QBI delta may disappear; reasonable compensation, payroll-tax mechanics, entity costs, and other return items still prevent an automatic S-Corp conclusion.
NJ does not conform to the federal QBI deduction (N.J.S.A. 54A:1-1 et seq.), so there is no matching 20% NJ deduction. That does not make NJ business income identical for both entity models: deductible S-Corp employer payroll expense and NJ-specific modifications can change the pass-through amount. The calculator recomputes each NJ side instead of applying one universal QBI "penalty."
New Jersey's Business Alternative Income Tax (BAIT, P.L. 2020, c. 116, amended by P.L. 2021, c. 419) lets qualifying pass-through entities pay NJ income tax at the entity level. Eligible members receive allocated refundable credits for their shares of BAIT paid. The entity-level payment generally is deductible federally under IRS Notice 2020-75 without entering the owner's individual $40,400 SALT-cap computation for 2026.
BAIT is available only to S-Corps, partnerships, and multi-member LLCs. Single-member LLCs and sole proprietorships cannot elect BAIT. This places the modeled BAIT federal-tax effect on the S-Corp side, but not the sole-proprietor side, in single-owner scenarios.
The entity-level BAIT payment can create a federal business deduction even when the owner takes the standard deduction or has total personal SALT below $40,400. The modeled federal-tax effect depends on the owner's federal brackets, the related QBI change, the refundable NJ credit, entity costs, and full-return facts. OBBBA (IRC 164(b)(6)) set the separate 2026 individual SALT cap at $40,400, with 1% annual increases through 2029, reverting to $10,000 in 2030.
The BAIT election is annual and must be made electronically through the NJ PTE File and Pay System before the original due date of the entity's PTE-100 return (March 15 of the following year for calendar-year filers). It cannot be made retroactively, and a filing extension does not extend the election.
The calculator runs five sequential steps and returns a modeled annual tax difference after compliance costs. The result is a screening estimate before full-return effects, not entity-selection advice. All figures use 2026 IRS-published rates per Rev. Proc. 2025-32 and OBBBA Section 70105 (which made the QBI deduction permanent).
Your W-2 salary is the most consequential input. The IRS requires every working S-Corp owner to pay themselves a market-rate salary before taking distributions (Treasury Reg. §1.162-7). No percentage of profit is a general guideline or safe harbor. Support the input with comparable market wages and the owner's duties, hours, geography, experience, management responsibility, and non-owner income-producing factors.
For an ordinary nonfarm sole proprietor, Schedule C net profit is generally multiplied by 92.35% before the Schedule SE line 4c adjustments. An S-Corp instead applies employer and employee FICA to supportable W-2 compensation; qualifying distributions are not wages. The 2026 Social Security wage base is $184,500, Medicare has no wage-base cap, and Additional Medicare Tax uses combined wages and self-employment compensation. The calculator recomputes both structures because the gross payroll-tax difference is not 15.3% of every dollar shifted to distributions.
Both LLCs and S-Corps are pass-through entities, so income flows to your personal return. The income tax bill is roughly comparable at the same income level, with small differences driven by QBI (Step 4) and the deductibility of employer payroll taxes on the S-Corp side.
The 20% QBI deduction (IRC §199A) is now permanent under OBBBA. The deduction base differs between structures: an LLC's QBI base is net income minus half of SE tax; an S-Corp's QBI base is K-1 distribution income only (W-2 salary is excluded). Below the 2026 QBI threshold (~$201,750 single / $403,500 MFJ), the LLC often gets the larger deduction - which partially offsets the modeled S-Corp FICA difference. Above the phase-out for non-SSTB businesses, the S-Corp's W-2 wages help satisfy the 50% wage limitation test, sometimes changing the direction of the comparison.
S-Corp status carries annual costs that the calculator subtracts from the gross SE/FICA difference: NJ CBT minimum tax (tiered by NJ gross receipts - $375 under $100K to $1,500 at $1M+, per N.J.S.A. 54:10A-5(e), not per-shareholder), payroll service (~$50-$100/mo), quarterly Form 941 and NJ-927 filings, annual W-2/1099 prep, a separate Form 1120-S federal return, and the NJ CBT-100S state return. The calculator uses a fixed $4,000/yr estimate.
Modeled Net Tax Difference = FICA Difference + QBI Delta + BAIT Federal-Tax Effect - S-Corp Compliance Costs. The QBI Delta can be positive (above phase-out, non-SSTB) or negative (below phase-out, where the LLC's larger QBI base reduces the modeled LLC-minus-S-Corp difference).
| Item | 2026 Value |
|---|---|
| Social Security wage base | $184,500 |
| Self-employment tax rate | 15.3% (12.4% SS + 2.9% Medicare) |
| Additional Medicare Tax | 0.9% above $200K (single) / $250K (MFJ) |
| Standard deduction (Single) | $16,100 |
| Standard deduction (MFJ) | $32,200 |
| QBI deduction (under phase-out) | 20% of qualified business income |
| QBI phase-out (Single) | ~$201,750 - $276,750 |
| QBI phase-out (MFJ) | ~$403,500 - $553,500 |
| SALT deduction cap | $40,400 (OBBBA, 1% annual increases through 2029) |
| NJ GIT rate range | 1.4% - 10.75% |
| NJ CBT minimum tax (S-Corp) | $375 - $1,500, tiered by NJ gross receipts (not per-shareholder) |
| NJ BAIT eligibility | S-Corps, partnerships, multi-member LLCs only |
It uses 2026 federal brackets (IRS Rev. Proc. 2025-32), the $184,500 SS wage base, the permanent 20% QBI deduction (OBBBA), and current NJ GIT brackets (1.4%-10.75%). It models federal income tax, 15.3% SE tax, QBI with the W-2 wage limitations above the 2026 threshold (~$201,750 single / $403,500 MFJ), and S-Corp compliance costs. Results are screening estimates before full-return effects; the model does not select an entity. Full-return facts can change the tax difference.
No. This calculator does not establish an income switch point or select an entity. Its disclosed static screening-model outputs show LLC-minus-S-Corp tax differences of $126 at $60K, $2,038 at $100K, $4,637 at $150K, and $6,587 at $250K. A full-return comparison can change direction based on supportable compensation, other W-2 income, filing status, QBI, BAIT, retirement and health-insurance items, compliance costs, and omitted facts.
Reasonable compensation is a facts-and-circumstances standard, not a percentage of profit. Support should start with comparable market wages and account for duties, hours, geography, experience, management responsibility, and non-owner income-producing factors. David E. Watson, P.C. v. United States shows that unreasonably low wages can be reclassified; it does not create a percentage safe harbor or defensible range.
Yes. For an eligible S-Corp, the BAIT toggle models the entity-level NJ payment and recomputes the federal-tax effect after the related K-1 and QBI changes. The entity deduction under IRS Notice 2020-75 is not conditioned on the owner's individual $40,400 SALT-cap position. There is no fixed BAIT effect; the result depends on the BAIT base, federal bracket, QBI, NJ member credit, deduction choice, and full-return facts. Sole proprietors and disregarded single-member LLCs cannot elect BAIT.
Below the 2026 phase-out, the LLC's QBI base is net income minus half of SE tax. The S-Corp's base is K-1 income only - W-2 salary is excluded. The LLC's larger base partially offsets the modeled S-Corp FICA difference (the calculator's 'QBI delta'). Above the phase-out for non-SSTB businesses, S-Corp W-2 wages help satisfy the 50% wage limitation test, which can change the comparison's direction.
$3,500-$5,000 typical: NJ CBT minimum tax (tiered by NJ gross receipts: $375 under $100K to $1,500 at $1M+, not per-shareholder), payroll service ($50-$100/mo), Form 941 and NJ-927 quarterlies, year-end W-2/1099 prep, separate Form 1120-S federal return ($800-$1,500), NJ CBT-100S state return ($500-$800). The calculator uses a fixed $4,000 estimate. Sole proprietors avoid all of these by filing Schedule C with the personal Form 1040.
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If the request fits current scope and capacity, Greg Monaco, CPA may reply in writing with availability, next steps, and proposed scope and pricing. Submitting the form does not create an engagement or promise a response or outcome. Privacy note: calculator inputs and results are not sent with this form; only the submitted contact fields are transmitted. Livingston, NJ; serving New Jersey.
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