S Corp Tax Savings Calculator 2026

What this calculator compares

A one-owner LLC is taxed like a sole proprietorship by default: all of your profit goes on Schedule C and all of it is subject to self-employment tax (15.3% up to the Social Security wage base, which is $184,500 for 2026). If the LLC elects to be taxed as an S corporation, you pay yourself a salary through payroll and take the rest of the profit as distributions. Payroll tax applies to the salary only.

The calculator runs both versions of the same year and compares what you keep:

• Default LLC: self-employment tax plus federal income tax, including the half-SE-tax deduction and the qualified business income (QBI) deduction.
• S corp: employer and employee Social Security and Medicare on your salary, federal unemployment tax (FUTA, $42 on the first $7,000 of wages after the usual state credit), federal income tax on salary plus the K-1 profit, and the extra running costs you enter.

A positive result means you keep more as an S corp. A negative result means the election would cost you money at these numbers.

Why the saving is smaller than most people expect

The usual pitch is simple: payroll tax on a $70,000 salary instead of self-employment tax on $120,000 of profit. That gap is real, but two things eat into it.

1. Your QBI deduction shrinks. Salary you pay yourself is not qualified business income. As a default LLC, up to 20% of your whole profit can be deducted; as an S corp, only the profit left after salary counts. Your income tax goes up.
2. The S corp costs money to run. Payroll software, a separate business tax return (Form 1120-S) and, in some states, an entity-level tax or fee.

How the result changes with profit

Same assumptions — single filer, $2,000 a year in S corp costs, federal tax only, and a salary that rises with profit:

The pattern: below roughly $80,000–$100,000 of steady profit, the gain is small or negative once costs are counted. It grows with profit, then flattens once your default-LLC earnings pass the Social Security wage base: above that point a sole proprietor stops paying the 12.4% part anyway, so the S corp only saves the 2.9% Medicare part on extra profit.

Choosing a “reasonable salary”

The salary is the most important input, and it is not a free choice. The IRS requires an S corp owner who works in the business to be paid reasonable compensation — roughly what the business would have to pay someone else to do the same work — before taking distributions. Paying yourself a token salary to avoid payroll tax is a well-known audit issue, and the IRS can reclassify distributions as wages.

Useful ways to set it: look at what employees in your role and area earn, what you would charge a client for the hours you spend, or what your own salary was in a similar job. Document how you chose the number. If in doubt, a CPA can produce a compensation study.

What the calculator leaves out

• State taxes. Some states tax S corps directly. California, for example, charges a 1.5% franchise tax on S corp net income with an $800 minimum, and New York City does not recognize the S election for its business tax. Add these to the running-costs field.
• State unemployment tax on your salary, which varies by state. Add it to running costs too.
• Retirement contributions. As an S corp, Solo 401(k) employer contributions are based on your W-2 salary (25% of it), not on total profit, so a low salary limits how much you can put away.
• Future Social Security benefits. Your benefit is based on earnings that had Social Security tax. A lower salary means a lower earnings record.
• The QBI wage limit above the income threshold. High earners in non-service businesses can use W-2 wages paid (including their own salary) to keep more of the QBI deduction. The calculator phases the deduction out as if your business were a service business, which is conservative for other businesses.

How to elect S corp status

An LLC or corporation elects by filing Form 2553. For the election to apply to a tax year, it generally has to be filed no more than 2 months and 15 days after that year begins — March 15 for a calendar-year business — or at any time during the year before. After that you run payroll for yourself, file Form 1120-S each year and issue yourself a Schedule K-1. Read the S corp vs LLC guide for the bigger picture, and compare with the self-employment tax calculator to see your current bill.

Frequently asked questions

At what profit does an S corp make sense?

There is no single number, because it depends on your salary, state and running costs. With federal tax only and $2,000 of costs, the gain in our examples turns positive somewhere between $60,000 and $90,000 of profit and becomes meaningful above roughly $100,000. Put in your own figures above.

Does an LLC by itself save tax?

No. A single-member LLC is taxed exactly like a sole proprietor unless it elects S corp (or C corp) treatment. The LLC is about legal separation, not tax.

Can I pay myself no salary and take only distributions?

Not if you work in the business. The IRS expects reasonable compensation first; distributions with little or no salary are a common reason S corps get examined.

Can I undo the election later?

Yes, an S election can be revoked, but you generally cannot make it again for five years without IRS consent. Treat it as a multi-year decision.