An LLC is a legal entity, not automatically a separate federal tax category. A single-member LLC is usually taxed like a sole proprietorship by default. A multi-member LLC is usually taxed like a partnership by default. For many solo owners, the biggest tax difference is not the income tax itself. It is self-employment tax.
The calculator on this site starts by estimating what the LLC side looks like before comparing it with an S-Corp model. That matters because S-Corp savings can look bigger than they really are if the LLC baseline is wrong.
What an LLC tax estimate should include
| Item | Why it matters |
|---|---|
| Net profit | Taxes are estimated from profit after business expenses, not gross sales. |
| Self-employment tax | Default LLC owners often pay Social Security and Medicare tax through self-employment tax. |
| Filing status | Additional Medicare thresholds differ for single and married filing jointly taxpayers. |
| State | State income tax can change the total burden even when federal self-employment tax is unchanged. |
How self-employment tax works in the estimate
For planning purposes, the calculator applies self-employment tax to 92.35% of net profit. That is a common way to approximate how the self-employment tax base is calculated. The Social Security portion applies up to the annual wage base, and Medicare remains uncapped with an additional Medicare layer above higher income thresholds.
This is still an estimate. It does not calculate every deduction, credit, retirement contribution, health insurance detail, local tax, or personal income tax bracket. The goal is to isolate the business-structure question: how much tax is connected to operating as a default LLC compared with an S-Corp election?
Example: $85,000 LLC profit
Assume a single owner has $85,000 in net profit. Under a default LLC estimate, most of that profit is exposed to self-employment tax. In Alabama, the current calculator model shows an estimated LLC tax burden around $16,070, including estimated state income tax.
If the same business elects S-Corp taxation, the tax model changes because payroll tax applies to reasonable salary instead of the full business profit. That is why the S-Corp comparison can show savings, especially once profit is high enough to leave meaningful distribution income after salary.
When this page is useful
This guide is most useful if you searched for an LLC tax calculator because you are trying to answer one of these questions:
- How much tax might I owe as a default LLC?
- Why does self-employment tax feel so high?
- At what profit level should I ask a CPA about S-Corp election?
- Does my state change the answer?
LLC tax calculator FAQ
Does this calculate my full federal income tax?
No. The tool is focused on the LLC versus S-Corp structure question. It estimates self-employment tax, payroll tax, state income tax, and S-Corp operating cost assumptions. A full tax return would need deductions, credits, spouse income, retirement contributions, health insurance, and other personal facts.
Should I use revenue or profit?
Use net profit after business expenses. A business with $150,000 of revenue and $70,000 of expenses should model $80,000 of profit, not $150,000 of revenue.
Why does the LLC number change by state?
Federal self-employment tax is not state-specific, but state income tax can change the total tax burden shown in the report. That is why the calculator asks for your state.
This page was written to explain the calculator logic in plain English and reviewed against the formulas documented on the methodology page. It is not tax advice and should not be used as a filing position.
Use the LLC vs S-Corp calculator to estimate the LLC side and compare it with an S-Corp election.