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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.
If you also have a salaried job, enter that W-2 income here. It reduces the Social Security wage base available for SE or payroll taxes.
Estimated Annual Savings with S-Corp
The estimated savings are modest at $814 per year. Whether the added compliance is worth it depends on your specific situation.
SE tax base: Net SE income x 92.35% per IRC 1402(a)(12). Social Security (12.4%) capped at $184,500 wage base minus any W-2 income. Medicare (2.9%) has no cap. Additional Medicare (0.9%) applies above $200K single / $250K MFJ per IRC 1401(b)(2).
S-Corp payroll: Employer and employee each pay 6.2% SS (up to wage base) + 1.45% Medicare. Employer also pays 0.6% FUTA on first $7,000. Employer portion 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. Federal benefit = BAIT payment x marginal federal rate, but only when total SALT exceeds the $40,400 cap (OBBBA, IRC 164(b)(6)).
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) above $200K single / $250K MFJ, not to W-2 wages or active S-Corp K-1 distributions for material participants. If you have investment income alongside this business, your true tax liability may be higher than shown.
Monaco CPA can analyze whether S-Corp makes sense for your specific situation, including BAIT, QBI optimization, and NJ compliance costs.
| Net Income | LLC Total Tax | S-Corp Total Tax | Annual Savings |
|---|---|---|---|
| $60,000 | $13,418 | $13,849 | -$431 |
| $100,000 | $25,836 | $25,022 | $814 |
| $150,000 | $44,264 | $41,177 | $3,087 |
| $250,000 | $80,046 | $74,912 | $5,134 |
Illustrative examples using 2026 rates, single filer, no other W-2 income, 45% reasonable salary, BAIT enabled, non-SSTB. S-Corp total includes $4,000 annual compliance costs. Actual results depend on your specific facts. Schedule a free consultation for your exact numbers.
An LLC taxed as a sole proprietorship (or disregarded entity) is simpler, cheaper to maintain, and often the right choice for businesses below $60,000 to $80,000 in net income. At lower income levels, the S-Corp compliance costs ($3,500 to $5,000 per year in NJ) eat most or all of the payroll tax savings.
LLCs also benefit from the full QBI deduction without the W-2 wage limitation. Below the SSTB threshold (~$202K single, ~$404K MFJ), the 20% deduction applies to net income minus half of SE tax, with no requirement to pay W-2 wages. 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.
The S-Corp advantage comes from splitting income into two buckets: a W-2 salary (subject to payroll taxes) and K-1 distributions (not subject to payroll taxes). Sole proprietors pay 15.3% SE tax on all net income up to the $184,500 Social Security wage base. An S-Corp owner pays 15.3% on salary only, saving roughly 15.3% on every dollar of distributions.
Above $100,000 in net income, the savings typically range from $3,000 to $15,000 per year after compliance costs. At $200,000 or higher, the savings become substantial and easily justify the added complexity. High-income SSTBs (above the QBI phase-out) benefit the most, because they have already lost the QBI deduction and therefore face no trade-off between lower salary and higher QBI.
NJ business owners get an additional S-Corp advantage through the BAIT election. Sole props and single-member LLCs cannot elect BAIT. Only S-Corps, partnerships, and multi-member LLCs qualify. For taxpayers whose SALT exceeds the $40,400 cap, BAIT shifts NJ income tax to the entity level, creating a federal deduction that would otherwise be lost.
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, there is no QBI trade-off to consider, and the S-Corp election becomes purely about payroll tax savings.
NJ does not conform to the federal QBI deduction (N.J.S.A. 54A:1-1 et seq.). Your full business income is subject to NJ GIT regardless of entity type, with no 20% reduction. This NJ non-conformity reduces the QBI "penalty" of S-Corp election for NJ taxpayers compared to states that follow federal QBI rules.
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. The owner receives a dollar-for-dollar refundable credit on their NJ-1040. The entity-level payment is deductible on the federal return as a state tax expense, per IRS Notice 2020-75, bypassing the $40,400 individual SALT cap for 2026.
BAIT is available only to S-Corps, partnerships, and multi-member LLCs. Single-member LLCs and sole proprietorships cannot elect BAIT. This makes BAIT an exclusive S-Corp benefit in single-owner scenarios.
BAIT produces a federal benefit only when total SALT (property tax plus state income tax) exceeds the $40,400 cap. For NJ homeowners with $10,000 or more in property taxes, the cap is often exceeded well before $100,000 in business income. OBBBA (IRC 164(b)(6)) set the 2026 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 filed by the original due date of the entity return (March 15 for calendar-year filers) via NJ Form PTE-100. It cannot be made retroactively.
The calculator runs five sequential steps and returns a net annual tax savings figure after compliance costs. All figures use 2026 IRS-published rates per Rev. Proc. 2025-32 and OBBBA Section 70401 (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). General guideline: 40% to 70% of net business income, depending on industry, role, and how much revenue depends on your personal effort.
As an LLC, you pay 15.3% self-employment tax on 92.35% of net income. As an S-Corp, FICA applies only to your W-2 salary - not to distributions. The 2026 Social Security wage base is $184,500; Medicare has no cap (plus 0.9% Additional Medicare Tax above $200,000 single / $250,000 MFJ). FICA savings on distributions equals roughly 15.3% times every dollar shifted from salary to distributions, up to the SS wage base.
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 S-Corp FICA savings. Above the phase-out for non-SSTB businesses, the S-Corp's W-2 wages help satisfy the 50% wage limitation test, sometimes flipping the analysis in the S-Corp's favor.
S-Corp status carries real annual costs that the calculator subtracts from gross savings: NJ CBT minimum tax ($375 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. Default is $4,000/yr; adjustable in advanced options.
Net Savings = FICA Savings + QBI Delta - 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 net S-Corp benefit).
| 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 - $2,000+ per shareholder, depending on gross receipts |
| 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%). 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. Estimates only - actual results depend on reasonable comp analysis, multi-state allocation, retirement contributions, and other deductions.
The breakeven point is typically $80K-$100K of net business income. Below $80K, NJ S-Corp compliance costs (~$3,500-$5,000/yr) usually exceed the FICA savings. Under the calculator's default assumptions, the modeled net savings are about $3.1K at $150K and $5.1K at $250K, before changing salary, other W-2 income, retirement contributions, or property-tax/SALT facts. SSTB owners (CPAs, lawyers, doctors, consultants) above the QBI phase-out get cleaner FICA savings because the QBI tradeoff largely disappears.
Treasury Reg. §1.162-7 requires market-rate compensation. Courts have accepted 40%-70% of net business income depending on industry, role, and revenue source (David E. Watson, P.C. v. United States, 668 F.3d 1008). If you personally generate every dollar, lean higher. If revenue comes partly from employees or recurring contracts, you can defensibly go lower. Too low triggers IRS audit risk; too high reduces FICA savings.
Yes. NJ BAIT lets S-Corps and multi-member LLCs pay NJ income tax at the entity level, deductible federally without the $40,400 SALT cap for 2026. For NJ business owners whose property taxes alone approach the cap, BAIT can produce $1K-$10K+ in additional federal savings. Sole proprietors and single-member LLCs cannot elect BAIT - one reason the S-Corp is more attractive in NJ than in many other states.
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 S-Corp's FICA savings (the calculator's 'QBI delta'). Above the phase-out for non-SSTB businesses, the analysis flips: S-Corp W-2 wages help satisfy the 50% wage limitation test.
$3,500-$5,000 typical: NJ CBT minimum tax ($375/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 defaults to $4,000 (adjustable in advanced options). Sole proprietors avoid all of these by filing Schedule C with the personal Form 1040.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, I inform you that any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.