S-Corp Tax Savings Calculator

Every CPA will tell you that an S-Corp can save you money on taxes. Very few will show you the math before you pay them to set one up. This S-Corp tax savings calculator does exactly that: it compares your total tax burden as a sole proprietor or single-member LLC against what you'd owe as an S-Corp owner-employee, down to the dollar, using 2026 IRS figures.

The core mechanic is the self-employment (SE) tax split. As a sole prop, every dollar of net profit is subject to SE tax — 15.3% on the first $184,500 of earnings and 2.9% above that. As an S-Corp, you pay yourself a W-2 salary and FICA taxes apply only to that salary. The remaining profit flows out as a K-1 distribution, which is not subject to FICA at all. The savings come from keeping that distribution out of FICA scope.

Enter your net profit, filing status, proposed salary, and estimated admin costs to see whether — and by how much — an S-Corp election makes sense for your situation.

A freelance consultant earns $150,000 net profit in 2026 and is considering an S-Corp election. They propose a $75,000 W-2 salary and estimate $2,500/year in admin costs.

As a sole proprietor:

• SE net earnings: $150,000 × 92.35% = $138,525
• SS tax (12.4%, capped at $184,500 wage base): $17,177
• Medicare tax (2.9%, no cap): $4,017
• Total SE tax: $21,194
• SE deduction (above-the-line, §164(f)): $10,597
• Taxable income: $150,000 − $10,597 − $16,100 standard deduction = $123,303
• Federal income tax: $22,191 (24% marginal rate)
• Total tax: $43,385

As an S-Corp ($75,000 salary):

• Employer FICA on $75k salary: $5,738 (S-Corp pays, deductible entity expense)
• Employee FICA withheld from W-2: $5,738
• Total FICA: $11,475
• K-1 distribution: $150,000 − $75,000 − $5,738 = $69,262 (no FICA)
• Taxable income: $150,000 − $5,738 − $16,100 = $128,163
• Federal income tax: $23,357
• Admin costs: $2,500
• Total tax + admin: $37,332

Not modelled in this calculator: the QBI deduction (20% deduction on qualified business income, available to both sole props and S-Corps on the distribution amount), the 0.9% Additional Medicare Tax above $200,000, state income tax, and the self-employed health insurance deduction. A CPA can layer these in once you have the baseline FICA comparison this tool provides.

An S-Corp is a pass-through entity: the corporation itself pays no federal income tax. Profit flows through to your personal return in two ways:

• W-2 wages — your salary as an employee of your own company. FICA applies: you pay the employee half (withheld from your paycheck) and the S-Corp pays the employer half. Both halves are ultimately your economic cost — the employer half reduces the business income that flows to you.
• K-1 distribution — your share of S-Corp profits after salary and expenses. This is not subject to FICA. This is where the savings come from.

The IRS is aware of this structure and has an explicit requirement: you must pay yourself a reasonable salary for the services you perform. Underpaying to maximize the FICA-free distribution is the fastest way to trigger a payroll tax audit (Revenue Ruling 74-44). The IRS has successfully recharacterized distributions as wages in court in cases where the salary was clearly below market for the work done.

That said, "reasonable" is not the same as "100% of profit." Most advisors consider 40–60% of net profit a defensible starting point for owner-operators who also handle all client work. Use the Reasonable Salary Calculator on this site to triangulate the number using three methods: market wage, revenue percentage, and profit split.

The S-Corp breakeven point depends on your admin costs and the salary percentage you use. At a 50% salary split and $2,500/year in admin costs, the S-Corp starts saving money at roughly $55,000–$60,000 in annual net profit for a single filer. Below that, the FICA savings don't cover the overhead.

S-Corp usually makes sense when:

• Net profit is consistently above $60,000/year
• The business is stable — S-Corp election has costs whether or not you're profitable
• You're in a service business where you, personally, are the primary value (consultants, designers, developers, coaches, therapists, marketers)
• You're already paying estimated taxes and know your self-employment tax burden well

S-Corp probably doesn't make sense when:

• Net profit is below $50,000 and variable — the admin cost likely exceeds the savings
• You plan to sell the business in the near term (C-Corp may be better for QSBS exclusion)
• You have significant retirement plan contributions planned — a Solo 401(k) with a sole prop can accomplish similar goals with less overhead
• You're in a state with S-Corp-specific franchise taxes or minimum taxes (California imposes a 1.5% net income tax with an $800 minimum)

The default in this calculator is $2,500/year, which is a reasonable median estimate for a simple single-owner S-Corp. The actual cost varies significantly:

• Payroll service: $500–$1,500/year (Gusto, ADP, Paychex, or QuickBooks Payroll). Required — you need a legitimate payroll system to issue W-2s and run quarterly 941 filings.
• Additional CPA time: $500–$2,000/year above what a sole prop return costs. S-Corp requires Form 1120-S plus your personal return; if your CPA charges more for S-Corp work, factor that in.
• State filing fees: Varies. Some states charge $0 additional; California charges the $800 minimum franchise tax plus 1.5% of S-Corp net income, which can wipe out the savings at lower income levels.
• Formation cost (one-time): $500–$1,500 for attorney or registered agent to set up the entity and file Form 2553 (S-Corp election). Not included in the annual cost estimate above.

Get quotes from a payroll service and your CPA before assuming $2,500. In expensive states or with complex tax situations, real admin costs can run $4,000–$6,000/year, which shifts the breakeven point significantly higher.

If you've been searching for an S-Corp tax calculator that doesn't require an account, a subscription, or an upsell, you've found it. This free S-Corp tax savings calculator uses 2026 IRS figures — the current Social Security wage base of $184,500, the §1402(a)(12) SE net earnings factor of 92.35%, and 2026 federal income tax brackets — to give you a real comparison between your current sole prop or LLC tax burden and what you'd owe as an S-Corp.

The S-Corp salary calculator component works by letting you set your proposed W-2 salary, then computing FICA on that salary only. The remainder of your profit passes through as a K-1 distribution — not subject to self-employment tax. That gap between your current SE tax and your S-Corp FICA is where the savings come from.

For a complete S-Corp tax planning toolkit, pair this with the Reasonable Salary Calculator (which tells you what salary the IRS expects) and the S-Corp vs LLC Calculator (which shows the exact income where the election pays off).