# How much S corp tax can I save?

Compares the 2026 federal tax of a sole proprietor or single-member LLC with an S corporation that pays the owner a reasonable salary: self-employment tax, payroll taxes, income tax, and the savings.

- Page: https://www.acalculator.org/finance/s-corp-tax-calculator
- JSON spec: https://www.acalculator.org/finance/s-corp-tax-calculator.json
- Version: 4ad697f24486

## Default answer

Example with the default inputs (Business profit $100,000.00, S corp salary $50,000.00, Extra S corp costs $0.00, Filing status Single, Other income $0.00): On $100,000.00 of profit with a $50,000.00 salary, an S corp saves $4,380.55 of federal tax a year.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| profit | Business profit | Net profit for the year before paying yourself: revenue minus business expenses. |
| salary | S corp salary | The reasonable salary the S corporation pays you as an employee (W-2 wages). |
| costs | Extra S corp costs | Yearly costs of running the S corp that a sole proprietor does not have: payroll service, the Form 1120-S return, state fees. |
| status | Filing status | Your federal filing status. |
| other | Other income | Other taxable income on your return that is not wages: interest, a pension. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| savings | S corp saves | Sole proprietor total minus S corp total; negative when the S corp costs more. |
| soleTotal | Sole proprietor: total tax | Income tax plus self-employment tax on the whole profit. |
| seTax | Sole proprietor: self-employment tax | 15.3% of 92.35% of profit (12.4% only up to the wage base). |
| soleIncomeTax | Sole proprietor: income tax | Total tax less self-employment tax. |
| sCorpTotal | S corp: total tax and costs | Income tax, both halves of Social Security and Medicare on the salary, FUTA, and extra costs. |
| payroll | S corp: payroll taxes | Employee and employer Social Security and Medicare on the salary, plus FUTA. |
| sCorpIncomeTax | S corp: income tax | Form 1040 tax on the salary and the pass-through profit (Additional Medicare Tax included). |
| passThrough | S corp: pass-through profit | Schedule K-1 income: profit less salary, employer payroll taxes, FUTA, and extra costs. |

## Method

Sole proprietor: Form 1040 with the profit on Schedule C: self-employment tax 15.3% of 92.35% of profit (Social Security part only up to $184,500), half of it deducted, the 20% QBI deduction, the standard deduction. S corp: employer and employee each pay 6.2% (to $184,500) and 1.45% of the salary; FUTA 0.6% of the first $7,000; pass-through profit = profit − salary − employer payroll taxes − FUTA − extra costs, which is qualified business income; Form 1040 with the salary as wages and the pass-through profit. Savings = sole proprietor total − (S corp income tax + payroll taxes + extra costs).

## Assumptions

- An estimate for tax year 2026 (IRS Rev. Proc. 2025-32, Publication 15), not tax or legal advice.
- The standard deduction, no children (the earned income credit without children applies at low incomes), one owner. Above the QBI threshold ($201,750 single, $403,500 jointly of taxable income) only the $400 minimum QBI deduction is taken, so results there are rough; the W-2 wage limit and specified service business rules are not included.
- State taxes, state unemployment tax, state S corp fees, health insurance, and retirement plan contributions are not included. FUTA assumes the full 5.4% credit.

## Worked examples

1. profit = $100,000.00, salary = $50,000.00, status = single gives seTax = $14,129.55, soleTotal = $22,366.55, passThrough = $46,133.00, sCorpIncomeTax = $10,294.00, payroll = $7,692.00, sCorpTotal = $17,986.00, savings = $4,380.55. Source: Schedule SE (92.35%, 15.3%), Form 8995 (20% QBI), Pub 15 (2026) 7.65% each side and FUTA 0.6% of $7,000.
2. profit = $100,000.00, salary = $50,000.00, costs = $2,000.00, status = single gives passThrough = $44,133.00.
3. profit = $300,000.00, salary = $120,000.00, status = mfj gives seTax = $30,912.45.

## FAQ

### How does an S corp save tax?

A sole proprietor (or single-member LLC) pays 15.3% self-employment tax on almost all profit. An S corp owner who works in the business is an employee: Social Security and Medicare (7.65% from the company and 7.65% from you) are paid only on the salary. The rest of the profit passes through without those taxes.

### How much salary do I have to pay myself?

A reasonable salary: about what the business would pay someone else for the same work. The IRS can treat distributions as wages when the salary is too low, and then charge the payroll taxes with penalties.

### When is an S corp worth it?

When the profit above a reasonable salary is large enough that the payroll tax saved is more than the extra costs: running payroll, a separate Form 1120-S return, and state fees. Type your own costs to see where that point is for you.

### Does an S corp change the QBI deduction?

Yes. The 20% qualified business income deduction is on the pass-through profit only, not on your salary, so a higher salary lowers it. This calculator includes that below the QBI threshold ($201,750 single, $403,500 jointly of taxable income in 2026).

### Why can the S corp cost more?

At low profit, or with a salary close to the profit, the payroll taxes are about the same as self-employment tax, while the QBI deduction is smaller and the extra costs remain. The result then shows a negative saving.

### What happens above the Social Security wage base?

The 12.4% Social Security part stops at $184,500 of wages and self-employment earnings in 2026. Above that, only the 2.9% Medicare part (and 0.9% Additional Medicare Tax) applies either way, so the saving per extra dollar of profit gets smaller.

## Sources

- IRS, S corporation compensation and medical insurance issues (reasonable compensation). https://www.irs.gov/businesses/small-businesses-self-employed/s-corporation-compensation-and-medical-insurance-issues (retrieved 2026-10-05)
- IRS, Publication 15 (2026), Employer’s Tax Guide: Social Security and Medicare rates, wage base $184,500, and FUTA. https://www.irs.gov/publications/p15 (retrieved 2026-10-05)
- IRS, Instructions for Form 940 (FUTA: 6.0% on the first $7,000, up to 5.4% credit). https://www.irs.gov/instructions/i940 (retrieved 2026-10-05)
- IRS, Instructions for Schedule SE (Form 1040). https://www.irs.gov/instructions/i1040sse (retrieved 2026-10-05)
- IRS, Instructions for Form 8995, Qualified Business Income Deduction Simplified Computation. https://www.irs.gov/instructions/i8995 (retrieved 2026-10-05)