S Corp Tax Savings Calculator
This compares payroll and self-employment tax only. Income tax changes a little too (deductions for half of SE tax, employer payroll tax and the QBI deduction shift), and state unemployment tax and state S corp taxes vary. Check with a tax professional before electing.
How the s corp tax savings calculation works
See what an S corp election saves on 2026 self-employment and payroll taxes: self-employment tax on all your profit as an LLC or sole proprietor, against payroll tax on a reasonable salary as an S corp, minus the extra costs of running one.
Self-employment tax as an LLC
On $120,000 of profit, self-employment tax applies to 92.35%, $110,820: 12.4% Social Security and 2.9% Medicare, $16,955.46.
Payroll tax on an S corp salary
Paying yourself a $60,000 salary means 7.65% employer and 7.65% employee FICA, $9,180, plus $42 of federal unemployment tax.
Add the extra S corp costs
Payroll, a separate corporate return and state fees: say $2,000 a year. The S corp total is $11,222.
Compare
$16,955.46 − $11,222 = $5,733.46 saved a year. The rest of the profit, after the salary and payroll costs, comes out as distributions without FICA.
Worked example. With $120,000 of profit, an LLC owner pays $16,955.46 of self-employment tax. As an S corp paying a $60,000 salary, payroll taxes are $9,222 including FUTA; with $2,000 of extra costs the S corp saves about $5,733 a year.
S Corp Tax Savings FAQ
How much can an S corp save in taxes?
The saving is the self-employment tax you no longer pay on profit taken as distributions, minus payroll tax on your salary and the extra costs of the S corp. It grows with profit and shrinks as your salary rises.
What is a reasonable salary for an S corp owner?
The IRS says an S corporation must pay shareholder-employees reasonable compensation before making non-wage distributions. Factors it lists include your training and experience, duties, time spent, what non-owner employees and comparable businesses pay for similar services, and compensation agreements. There is no IRS percentage of profit; courts decide on the facts of each case.
Can I pay myself a low salary and take the rest as distributions?
Not if the salary is below what your work is worth. The IRS can reclassify distributions as wages, and its fact sheet FS-2008-25 warns S corporations not to avoid employment tax by calling officer pay distributions, loans or personal expenses. Pay received for your own services should be wages.
What is the S corp tax rate?
An S corporation usually pays no federal income tax itself: profit passes through to the shareholders, who pay at their individual rates (the corporation is taxed only on certain built-in gains and passive income). Your salary carries 15.3% FICA, 7.65% from the company and 7.65% from you, with Social Security capped at $184,500 of wages in 2026. Distributions carry no FICA.
Do S corp owners pay self-employment tax?
Not on their S corp income. Instead, the salary is subject to Social Security and Medicare through payroll, at the same combined 15.3% as self-employment tax. The saving comes from the profit you take as distributions, which has no payroll or self-employment tax.
At what profit does an S corp make sense?
When the self-employment tax saved on distributions is bigger than the extra payroll and running costs. With $2,000 of extra costs, $50,000 of profit and a $30,000 salary saves about $433 a year, while $40,000 of profit and a $25,000 salary costs about $215 more. These salaries are only examples; use a salary that is reasonable for your work. If the headline shows a cost instead of a saving, staying an LLC is cheaper.
What's the difference between an LLC and an S corp?
An LLC is a legal structure; an S corp is a tax election that an LLC or corporation can make with the IRS on Form 2553, signed by all shareholders. As an S corp, you file Form 1120-S each year, are paid a salary through payroll and can take the rest of the profit as distributions.
Does an S corp lower my income tax?
Not much on its own. This calculator compares payroll and self-employment tax only. Deductions shift slightly: the deduction for half of self-employment tax goes away, and the qualified business income (QBI) deduction, up to 20% of QBI, does not count your reasonable S corp salary as QBI. Ask a tax professional for the full picture.
Do I still pay unemployment tax as an S corp?
Yes, on your salary: FUTA is 6.0% of the first $7,000, or 0.6% after the full credit for state unemployment tax, plus your state's own unemployment tax.
Sources: IRS: S corporation compensation and medical insurance issues · IRS FS-2008-25: Wage compensation for S corporation officers · IRS: S corporations · IRS Publication 15 (2026), Employer's Tax Guide · IRS: Qualified business income deduction · IRS: Self-employment tax (Social Security and Medicare taxes) · IRS Topic 560: Additional Medicare Tax · IRS Topic 759: Form 940 – Employer's Annual Federal Unemployment (FUTA) Tax Return