LLC vs. S-Corp Tax Savings Calculator (Connecticut, 2026)

When does an S-Corp election make sense in Connecticut?

A single-member LLC is taxed like a sole proprietorship by default. Every dollar of net profit is subject to self-employment tax: 15.3% on the first $184,500 of self-employment earnings in 2026 (Social Security plus Medicare), and 2.9% Medicare on everything above that. On $100,000 of profit, that comes to more than $14,000 before any income tax.

An LLC can elect to be taxed as an S-Corporation by filing IRS Form 2553. You then become an employee of your own company. You pay yourself a reasonable salary through payroll, and Social Security and Medicare apply only to that salary. Whatever profit is left can be taken as distributions, which aren't subject to those payroll taxes. Income tax still applies to all of it.

What the election costs

• Payroll: you need to run payroll, file quarterly payroll returns and issue yourself a W-2. Most owners use a payroll service.
• Unemployment taxes: Connecticut treats corporate officers who work in the business as employees, so CT unemployment tax applies to your salary (1.9% on the first $27,000 for new employers in 2026). Federal unemployment (FUTA) adds up to $42 a year.
• CT Paid Leave: 0.5% of your salary is withheld for CT Paid Leave. It's employee-paid, but here the employee is you.
• A separate business return: S-Corps file Form 1120-S plus a Connecticut return, which usually means a higher tax-prep bill.

The “reasonable salary” rule

The IRS expects S-Corp owners who work in the business to pay themselves reasonable compensation before taking distributions. A salary set too low to dodge payroll tax is a well-known audit target. Think about what you would pay someone else to do your job, look at industry wage data, and keep notes on how you chose the number.

A rough rule of thumb

For many service businesses, the election starts paying off once net profit is steadily above $50,000 to $80,000 a year. Below that, the payroll, unemployment and tax-prep costs often eat most of the savings. Your result depends on your salary, your other income and your plans, which is why the calculator lets you change every cost.

Timing

To be treated as an S-Corp for a full tax year, Form 2553 is generally due within two months and 15 days after the start of that tax year (March 15 for calendar-year businesses). Late-election relief exists, but it's easier to plan ahead. If the numbers above look promising, set up payroll and the election together so your first paycheck is on time.