S Corp Tax Calculator

This S corp tax calculator compares what you would pay in payroll taxes as a sole proprietor or single-member LLC with what you would pay after electing S corporation status, using 2026 federal figures. Enter your business profit, a reasonable salary for yourself and the extra yearly cost of running an S corp, and it shows your estimated net savings.

As a sole proprietor you pay self-employment tax on nearly all of your profit. In an S corp you pay Social Security and Medicare only on the salary you draw, not on the rest of the profit taken as distributions. The catch is that the salary must be reasonable, and running payroll costs money. This is a simplified federal estimate, not tax advice.

How to Use the S Corp Tax Calculator

1
Enter your business profit
Type your yearly net profit before paying yourself: revenue minus business expenses.
2
Set a reasonable salary
Enter the W-2 salary the S corp would pay you. Base it on what the business would pay someone else to do your job, not on the tax you want to save.
3
Pick your filing status and extra costs
Choose your filing status and adjust the extra S-corp costs (payroll service, the Form 1120-S return, state fees). The default is $2,000 a year as a placeholder; use your own quotes.
4
Compare the results
See payroll taxes side by side, the payroll-tax savings, net savings after costs, and a rough federal income tax figure for both structures.

How the S corp vs LLC comparison works

A single-member LLC is taxed like a sole proprietorship by default: all of the profit is subject to self-employment tax on Schedule SE, at 15.3% on 92.35% of profit, with the Social Security part capped at the 2026 wage base of $184,500.

If the business elects S corporation status (Form 2553), you become an employee of your own company. The company pays you a salary and withholds the employee half of FICA (6.2% Social Security plus 1.45% Medicare) while paying a matching employer half. Profit left after salary and expenses passes through to your personal return as a distribution, which is subject to income tax but not to Social Security or Medicare tax.

The calculator subtracts the S-corp payroll taxes from the sole-proprietor SE tax to get the payroll-tax savings, then subtracts the extra cost of running an S corp. The 0.9% Additional Medicare Tax is included on both sides where it applies; there is no employer share of it.

Sole prop / LLC: SE tax = 12.4% × min(profit × 92.35%, $184,500) + 2.9% × profit × 92.35%
S corp: payroll tax = 2 × (6.2% × min(salary, $184,500) + 1.45% × salary)
Payroll-tax savings = sole prop SE tax − S corp payroll tax
Net savings = payroll-tax savings − extra S-corp costs

Worked example: $150,000 profit, $80,000 salary

A single owner with $150,000 of profit before paying themselves, a salary of $80,000 and $2,000 of extra S-corp costs, for the 2026 tax year:

Sole proprietor: net SE earnings are $138,525, so SE tax is $17,177 Social Security plus $4,017 Medicare = $21,194.
S corp: employer share $4,960 + $1,160 = $6,120, and the employee share is the same $6,120, for $12,240 of payroll tax.
Payroll-tax savings: $21,194 − $12,240 = $8,954. After $2,000 of extra costs, net savings are about $6,954.
The remaining $61,880 ($150,000 − $80,000 salary − $6,120 employer tax − $2,000 costs) passes through as a distribution without payroll tax.
Income tax is not identical: the sole proprietor's QBI deduction is $24,661, but the S corp owner's is only $12,376 because salary doesn't count as qualified business income. Estimated income tax is $16,413 vs $19,815, so the all-in advantage shrinks to about $3,553.

When an S corp usually starts to make sense

The savings grow with the gap between profit and a reasonable salary, while the extra costs are roughly fixed. At lower profits the costs can wipe out the savings. Examples for a single filer with $2,000 of extra costs; the salaries are illustrations only, and yours must fit your own role and market.

Profit	Salary	Payroll-tax savings	Net savings	All-in incl. income tax
$60,000	$40,000	$2,358	$358	−$137
$80,000	$45,000	$4,419	$2,419	$1,490
$100,000	$60,000	$4,950	$2,950	$934
$150,000	$80,000	$8,954	$6,954	$3,553
$250,000	$100,000	$14,551	$12,551	$10,908 (QBI not modeled)

Reasonable compensation: the rule the IRS watches

An S-corp owner who works in the business must be paid reasonable compensation before taking distributions. The IRS looks at what comparable businesses pay for similar work, your duties, time and experience, and what the business earns. Setting a very low salary to avoid payroll tax is a well-known audit issue: the IRS can reclassify distributions as wages and assess back payroll taxes, penalties and interest. In David E. Watson, P.C. v. United States, a CPA who paid himself $24,000 had the court set his reasonable salary at about $91,000.

The calculator shows how a lower salary inflates the savings: at $150,000 of profit, a $30,000 salary would show $14,604 of net savings instead of $6,954. That extra saving is exactly what an examiner would question. Document how you set your pay, for example with salary surveys for your role and region, and review it each year.

Legal ways to lower taxes as a small business

Whether you stay a sole proprietor or elect S-corp status, these legal strategies reduce tax. Keep records for all of them.

Deduct every ordinary and necessary business expense, from software and equipment to business mileage and professional fees.
Home office: deduct a space used regularly and exclusively for business. In an S corp this is usually done through an accountable plan that reimburses you.
Section 179: expense qualifying equipment in the year you buy it, up to $2,560,000 for 2026. See the Section 179 calculator.
Retirement plans: a Solo 401(k) allows $24,500 of employee deferrals for 2026 ($8,000 more at 50 or older) plus an employer contribution; a SEP-IRA takes employer contributions only. In an S corp, the employer contribution is based on your W-2 salary, so a low salary also limits your retirement savings.
Health insurance: self-employed owners can deduct premiums; S-corp owners with more than 2% of the shares have premiums added to their W-2 and then deduct them. An HSA allows $4,400 self-only or $8,750 family for 2026.
Hire your children properly: in a sole proprietorship, wages to your child under 18 are exempt from Social Security and Medicare. That exemption does not apply to wages paid by an S corporation.
Claim the 20% QBI deduction where you qualify; above the threshold, the W-2 wage limit can make S-corp salary levels matter.

What this comparison leaves out

State taxes can change the answer. Some states charge S corporations and LLCs an annual franchise or minimum tax; California, for example, has an $800 minimum franchise tax and a 1.5% tax on S-corp net income. A few cities and states do not recognize the S election at all.

The calculator also ignores federal and state unemployment tax on the salary, QBI rules above the threshold, differences in retirement contributions and health insurance handling, other household income and credits. A lower salary also means lower Social Security earnings on record, which can reduce future benefits. Married filing separately is not supported. Before filing Form 2553, run the numbers with a CPA or enrolled agent.

Features

Sole prop / LLC self-employment tax vs S-corp employer and employee FICA
Payroll-tax savings minus extra S-corp costs for a net savings figure
Editable extra costs for payroll service, tax prep and state fees
Rough federal income tax for both structures with the QBI deduction
Warns when the salary is zero or the numbers don't add up

Frequently Asked Questions

At what income does an S corp make sense?

There is no single cut-off; it depends on how far your profit exceeds a reasonable salary and on your extra costs. In our examples for a single filer with $2,000 of extra costs, $60,000 of profit with a $40,000 salary saves almost nothing once income tax is included, while $150,000 with an $80,000 salary saves about $3,500 to $7,000. Run your own numbers.

How much can an S corp save on self-employment tax?

The saving is roughly 15.3% of the profit you take as distributions instead of salary, less the extra costs, until earnings pass the $184,500 Social Security wage base. With $150,000 of profit and an $80,000 salary, payroll tax drops from $21,194 to $12,240, saving $8,954 before costs. A smaller QBI deduction can give back part of that in income tax.

What is a reasonable salary for an S corp owner?

It is what the business would have to pay someone else for the same work, based on your duties, hours, experience and local market rates. The IRS has no fixed percentage. Salary surveys and job-listing data for your role are good evidence. Paying yourself too little invites the IRS to reclassify distributions as wages with back taxes and penalties.

Is an S corp better than an LLC for taxes?

An LLC is a legal structure; an S corp is a tax election. An LLC can elect S-corp taxation with Form 2553. Staying a default single-member LLC is simpler and cheaper but carries full self-employment tax. Electing S status can cut payroll tax once profit clearly exceeds a reasonable salary, at the cost of payroll, a separate Form 1120-S return and possible state taxes.

Does an S corp lower my income tax?

Not much. Both a sole proprietorship and an S corp pass profit through to your personal return, so the same brackets apply. Differences come from the employer payroll tax and extra costs being deductible, and from the QBI deduction, which in an S corp applies only to the distribution, not your salary. In our $150,000 example, S-corp income tax was about $3,400 higher.

Last reviewed September 21, 2026