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No. 20Operations & People

S Corp Savings Calculator

An S corporation election can cut self-employment tax — but only if your profit is high enough to cover a reasonable salary, payroll and the extra paperwork. Compare both with your own numbers.

A year, after business expenses. The Business Idea Check’s year-one profit is a good starting point.

Must be reasonable for the work you do — the IRS lists factors, not a ratio (IRS guidance).

Your top bracket, e.g. 12%, 22% or 24%.

What an S corp costs to run, a year

Some states charge S corps an annual tax or minimum fee.

Results

An S corp could save you, a year

$1,068

Federal taxes and S corp costs, 2026 rates

Sole proprietor / single-member LLCSelf-employment tax $12,717 + income tax $14,721
$27,438
S corporationPayroll taxes $7,692 + income tax $17,078 + running costs $1,600
$26,370
Paid as profit, not salaryNo Social Security or Medicare tax on this part
$34,533
Salary as a share of profit
56%

Federal only, simplified. Leaves out state income tax, the 0.9% Additional Medicare Tax, QBI limits for higher incomes, and retirement and health-insurance choices — all of which can change the answer. Have GHL check your numbers.

Show the calculation
  1. Self-employment tax$90,000 × 92.35% × 15.3% (Social Security only up to $184,500)= $12,717
  2. S corp payroll taxes$50,000 × 7.65% × 2 sides + $42 federal unemployment= $7,692
  3. Left after salary$90,000 − salary − employer taxes − extra costs= $34,533
  4. Difference$27,438 − $26,370= $1,068

S corp savings at other profits and salaries

Same tax bracket and running costs. Negative = the S corp costs more.

S corp savings at other profits and salaries: rows are Profit, columns are Salary, share of profit
Profit ↓ · Salary, share of profit →40%55%70%
$45,000$1,142-$97-$1,336
$67,500$2,390$531-$1,327
$90,000$3,637$1,159-$1,318
$135,000$6,132$2,416-$1,301
$180,000$8,627$3,672-$1,283

How it’s calculated

Self-employment tax
equals Profit × 92.35% × 15.3% (Social Security part only up to the wage base)
S corp payroll tax
equals Salary × 7.65% employer + Salary × 7.65% employee + federal unemployment
Income tax
equals Bracket × (taxable income − 20% qualified business income deduction)
Savings
equals Sole proprietor total − (S corp payroll tax + income tax + running costs)

Worked example

A consultant expects $90,000 profit, would take a $50,000 salary, is in the 22% bracket, and expects $600 a year for payroll and $1,000 extra for the S corp tax return.

  1. As a sole proprietor: self-employment tax $12,717 + income tax $14,721 = $27,438
  2. As an S corp: payroll taxes $7,692 + income tax $17,078 + costs $1,600 = $26,370
  3. Difference: $27,438 − $26,370 = $1,068

About $1,068 a year at these numbers — before state taxes and the other items below.

Assumptions and limitations

  • 2026 federal rates: Social Security tax applies up to $184,500 of wages or self-employment earnings; Medicare has no cap.
  • The salary must be reasonable for the work you do. The IRS looks at factors such as your duties, time and what others are paid — there is no safe percentage.
  • Income tax is estimated at a single bracket you choose, after the 20% qualified business income deduction. Income limits on that deduction, the 0.9% Additional Medicare Tax and state income taxes are not included.
  • Health insurance, retirement contributions and other benefits change both sides and are not included.
  • An S corporation is a tax election made with Form 2553 by an eligible corporation or LLC — not a separate type of business.

Results are estimates for information only and are not financial, tax or legal advice. See our disclaimer.