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Tax Rate of distributions of single member owner of an LLC taxed as an S Corp

TheConfusedTaxGuy — Tue, 10 Mar 2026 07:05:08 GMT

I file jointly with my wife for a total income of 350K. I plan to do consulting on the side next year and have an LLC established being taxed as an S Corp. I plan to take a reasonable salary from my S Corp as an employee and take additional distributions throughout the year as the sole owner as needed. I understand the salary will be taxed via payroll and distributions are not taxed (on the company level) but will be reported on the K-1 when I file my personal taxes. At what tax rate is that then hit with when I do my personal taxes? I ask because I wonder if due to my high household income the additional passthrough income from the K-1, via the company’s distributions to me, may be taxed at a higher tax rate vs the self-employment tax rate if I was not tax structured as an S Corp and just a normal LLC. Or am I completely misunderstanding it?

Example: $100K in net profit from LLC. I take a salary of $70K and $30K remains, which can be distributed to me as the sole member. Due to my new household income of $420K ($350K joint income plus the additional $70K I take as salary from the corporation) when the $30K is reported on K-1, is that hit by my personal income tax rate, which can be higher than the 15.3% self-employment tax rate?

Re: Tax Rate of distributions of single member owner of an LLC taxed as an S Corp

Anonymous_ — Tue, 15 Nov 2022 23:13:38 GMT

@TheConfusedTaxGuy wrote:

...Or am I completely misunderstanding it?

You are misunderstanding it. Distributions that are not in excess of your basis in the entity are not taxable; only income you receive as salary (via W-2) and profit (and other miscellaneous income) passed through to you on your K-1 are taxable.

Re: Tax Rate of distributions of single member owner of an LLC taxed as an S Corp

Anonymous_ — Tue, 15 Nov 2022 23:16:35 GMT

In your example, the $70,000 salary is taxable to you via W-2 and the $30,000 is also taxable to you (as it is passed through to you on your K-1, whether or not that $30,000 is actually distributed).

Re: Tax Rate of distributions of single member owner of an LLC taxed as an S Corp

TheConfusedTaxGuy — Wed, 16 Nov 2022 03:40:45 GMT

@Anonymous_ I completely understand that part. My specific question is when the $30K is taxed on my personal income tax when reported on the K-1, due to our high combined gross Income, could it be taxed at a greater rate than let’s say self-employment tax. I ask because if it can be greater I wonder if I should simply stay as an LLC vs LLC taxable as S Corp.

Re: Tax Rate of distributions of single member owner of an LLC taxed as an S Corp

TheConfusedTaxGuy — Wed, 16 Nov 2022 03:44:20 GMT

Re: Tax Rate of distributions of single member owner of an LLC taxed as an S Corp

Anonymous_ — Wed, 16 Nov 2022 04:04:31 GMT

Not really since the W-2 income will kick you up into a higher tax bracket in the same way a the profit passed through from the S corporation would do so.

Regardless, the $30,000 (in the hypothetical) would not be subject to self-employment tax.

Re: Tax Rate of distributions of single member owner of an LLC taxed as an S Corp

Mike9241 — Wed, 16 Nov 2022 08:48:51 GMT

it's not the distributions (unless in excess of tax basis. this will be determined when you complete form 7203) what is taxed is the remaining profits after taking your salary.