S Corp Tax Calculator
See how much you would save by electing S-corp status in 2026. Compare sole proprietor / LLC taxes against an S-corp side by side — self-employment tax, payroll taxes, QBI deduction, and federal income tax included.
Profit after business expenses, before paying yourself.
Defaults to 40% of profit. Not sure what is defensible? Use our S-Corp Salary Calculator.
Wages from a day job — they use up part of the $184,500 Social Security wage base first.
Payroll service, 1120-S prep, state fees. Default $1,200 — include everything the S-corp adds.
Estimated annual S-corp savings
$7,891
after $1,200 payroll/admin cost
Total federal tax
$37,608 vs $28,516
sole prop vs S-corp
Side-by-Side Breakdown
| Sole Prop / LLC | S-Corp | |
|---|---|---|
| SE tax / payroll taxes | $21,194 | $9,222 |
| QBI deduction (20%) | −$24,661 | −$16,834 |
| Federal income tax | $16,413 | $19,294 |
| Total federal tax | $37,608 | $28,516 |
| Payroll / admin cost | $0 | $1,200 |
| All-in cost | $37,608 | $29,716 |
S-corp column: salary of $60,000 + $84,168 K-1 distribution income. Employer payroll taxes and FUTA are deducted before the K-1 flows through.
Payroll-tax savings
$11,972
Added income tax + costs
$4,081
Break-even profit
~$15,500
Savings turn positive around $15,500 of profit
At your salary ratio (40%) and $1,200 of payroll/admin cost, the S-corp starts beating a sole proprietorship at roughly this profit level. This federal break-even ignores state franchise taxes — with 1120-S prep and state minimums included in the cost field, most owners see real break-even between $40,000 and $60,000.
Federal comparison for tax year 2026 using the standard deduction. State income tax applies to both structures roughly equally, but state S-corp charges (like California's 1.5% franchise tax) are not included — see the state notes below.
How the S-Corp Savings Work
Split profit into salary + distribution
As a sole proprietor, all $150,000 of profit is hit with 15.3% self-employment tax. An S-corp pays you a reasonable salary and passes the rest through as a K-1 distribution.
Only the salary pays payroll tax
FICA (15.3% split employee/employer) applies to the salary only. The distribution avoids self-employment tax entirely — that is the whole savings engine.
Net out the costs
Payroll service, a separate 1120-S return, and a slightly smaller QBI deduction push back. The calculator nets it all and shows your true annual savings and break-even.
When an S-Corp Is NOT Worth It
The election is not free money. Skip it (for now) if any of these apply:
Profit under ~$40,000-$60,000
Payroll costs, 1120-S prep, and state minimums usually eat the payroll-tax savings at low profit levels. Run your exact break-even above.
You already max the Social Security wage base
If W-2 wages from a day job already exceed $184,500, your side-business profit only pays the 2.9% Medicare portion — there is far less tax to save.
You want maximum retirement contributions
Solo 401(k) and SEP-IRA limits key off W-2 salary in an S-corp. A lower salary shrinks how much you can shelter for retirement.
Your state claws the savings back
California charges S-corps a 1.5% franchise tax on net income (minimum $800). New York City does not recognize the S election at all — the corporation pays NYC General Corporation Tax. Tennessee's excise tax applies too.
Form 2553 deadline: 2 months and 15 days
To have the S election apply to a tax year, file Form 2553 no more than 2 months and 15 days after that year begins — March 16, 2026 for calendar-year businesses that want 2026 treatment (March 15 falls on a Sunday). New entities get 2 months and 15 days from formation. Missed it? Late-election relief exists under Rev. Proc. 2013-30 if you have reasonable cause.
What This Calculator Includes
Full 2026 SE tax math
12.4% Social Security up to the $184,500 wage base, 2.9% Medicare, and the 0.9% Additional Medicare surtax.
Real S-corp payroll costs
Both halves of FICA on your salary, FUTA (up to $42), and your payroll/admin overhead — all netted against the savings.
QBI on both sides
The 20% §199A deduction is applied to sole-prop profit and to S-corp K-1 income (salary is not QBI), so the comparison is honest.
Your exact break-even
Scans profit levels with your salary ratio and costs to show where the S-corp starts winning.
Why Use This Calculator?
Decide before you commit
An S election adds real overhead. See the dollar savings first, then decide whether the paperwork is worth it for your profit level.
Not just the payroll-tax half-truth
Most comparisons stop at "save 15.3% on distributions." This one also counts the smaller QBI base, the lost half-SE deduction, FUTA, and your admin costs.
Pairs with a salary check
Savings depend entirely on the salary you choose. Use the S-Corp Salary Calculator to pick a number the IRS will accept, then plug it in here.
Frequently Asked Questions
Where S-corp tax savings actually come from
A sole proprietor or single-member LLC (taxed as a disregarded entity) pays 15.3% self-employment tax on 92.35% of net profit — 12.4% Social Security up to the $184,500 wage base for 2026, plus 2.9% Medicare with no cap. An S corporation changes the character of that income: the owner takes a W-2 salary (subject to FICA) and receives the remaining profit as a K-1 distribution that is not subject to self-employment tax at all.
| $100,000 profit example (single, 40% salary) | Sole prop / LLC | S-corp |
|---|---|---|
| SE tax / payroll taxes | $14,130 | $6,162 |
| Federal income tax (after QBI) | $8,235 | $9,773 |
| Payroll / admin cost | $0 | $1,200 |
| All-in cost | $22,365 | $17,135 |
Net savings: about $5,230 per year. Notice the income tax is slightly higher on the S-corp side — the QBI deduction shrinks (shareholder salary is not qualified business income) and the half-SE deduction disappears. Honest comparisons must count both effects, which is exactly what this calculator does.
Reasonable compensation: the rule that limits the strategy
The IRS requires S-corp shareholder-employees to receive reasonable compensation for services before any distributions. There is no statutory percentage; examiners and courts weigh training and experience, duties and responsibilities, time devoted to the business, and what comparable businesses pay for similar services. Setting salary near zero to maximize distributions is the classic abuse pattern — the IRS can reclassify distributions as wages and assess back payroll taxes, penalties, and interest.
Practical starting points: many service-business owners land between 35% and 50% of profit, adjusted for market pay data for their role. Our S-Corp Salary Calculator walks through the strategies and flags splits the IRS is likely to challenge.
How and when to elect: Form 2553
An LLC or corporation elects S-corp taxation by filing Form 2553 (an LLC can combine it with, or skip, Form 8832). The deadline is 2 months and 15 days after the start of the tax year the election should take effect — March 16, 2026 for calendar-year 2026 (March 15 falls on a Sunday). A newly formed entity has 2 months and 15 days from its formation date. All shareholders must consent, the entity must be domestic with no more than 100 shareholders and one class of stock, and shareholders must generally be individuals, certain trusts, or estates.
Missed the window? The IRS routinely grants late-election relief under Rev. Proc. 2013-30 when the entity intended to elect, has reasonable cause, and has filed consistently with an S election. After electing, remember the compliance cadence: run payroll (Forms 941/940, W-2) and file Form 1120-S by March 15 each year.
Official References
Sources used for the 2026 rates and rules in this calculator (verified July 2026):
- IRS: S Corporations
What an S corporation is, eligibility requirements, and filing obligations.
- IRS: S Corporation Compensation Issues (Reasonable Compensation)
The IRS standard for paying shareholder-employees reasonable wages before distributions.
- IRS: About Form 2553, Election by a Small Business Corporation
The election form and its 2-months-and-15-days deadline.
- IRS IR-2025-103 / Rev. Proc. 2025-32: 2026 Inflation Adjustments
2026 federal tax brackets, standard deduction, and §199A QBI thresholds.
- SSA: Contribution and Benefit Base
The 2026 Social Security wage base of $184,500.
- IRS Topic 759: Form 940 and FUTA
FUTA's 6.0% rate on the first $7,000 of wages and the 5.4% state credit.
This calculator provides a federal estimate for tax year 2026 using the standard deduction and a simplified 20% QBI deduction. It is not tax advice — entity elections have state-tax, retirement, and legal consequences. Consult a qualified tax professional before filing Form 2553.
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