Free Tax Tool
LLC vs S-Corp Tax Calculator
See the full picture. This calculator compares your total tax burden as an LLC vs S-Corp, including federal income tax, self-employment tax, NJ state tax, the QBI deduction, NJ BAIT election savings, and S-Corp compliance costs. Built for NJ business owners using 2026 rates.
Your Business Details
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.
LLC (Sole Prop / Schedule C)
S-Corp Election
How This Calculator Works
- This is a full-stack comparison: self-employment tax or payroll tax, plus federal income tax, plus NJ income tax, minus QBI savings, minus BAIT savings, plus S-Corp compliance costs.
- LLC scenario uses the 92.35% SE tax base per IRC 1402(a)(12). S-Corp scenario splits income into W-2 salary (45%) and K-1 distributions.
- QBI deduction (Section 199A, up to 20%) is now permanent under OBBBA (signed July 4, 2025). NJ does not conform to the federal QBI deduction.
- NJ BAIT (P.L. 2020, c. 116) lets S-Corps pay NJ income tax at the entity level, bypassing the federal SALT cap. Sole props cannot elect BAIT.
- S-Corp compliance costs estimated at $4,000/year (payroll service, 1120-S prep, NJ CBT-100S minimum, NJ annual report).
- 2026 SS wage base: $184,500. Federal brackets per Rev. Proc. 2025-32. NJ brackets per current NJ GIT schedule.
Detailed calculation methodology
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.
Want me to run your exact numbers?
Every client works directly with me, not a junior. I respond within 24 hours and can tell you whether S-Corp makes sense for your specific situation, including BAIT, QBI optimization, and NJ compliance costs.
Example Comparisons (2026 Rates, Single Filer, No Other W-2, 45% Salary)
| Net Income | LLC Total Tax | S-Corp Total Tax | Annual Savings |
|---|---|---|---|
| $60,000 | $14,098 | $14,297 | -$199 |
| $100,000 | $27,591 | $24,887 | $2,704 |
| $150,000 | $46,017 | $40,355 | $5,662 |
| $250,000 | $84,766 | $73,989 | $10,777 |
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.
When Staying as an LLC Is the Better Choice
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.
When S-Corp Election Saves Money
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 QBI Deduction: How It Changes the Math
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.
NJ BAIT Election: The S-Corp-Only SALT Workaround
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.
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.
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.