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Updated for 2026 tax rules

S-Corp Savings Calculator

Would an S-corp election lower your taxes, or just add cost? Compare self-employment tax as a sole owner with payroll tax on a reasonable salary as an S-corp, including the extra costs and the effect on your income tax and QBI deduction.

Enter your numbers

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Revenue minus business expenses for the year, before any owner salary.

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It must be a reasonable salary for the work you do. The IRS can reclassify distributions as wages if it isn't.

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A day job matters: it can use up the Social Security wage base.

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0 in Texas and Florida.

Extra yearly costs of running an S-corp
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Replace these with your real quotes. State unemployment tax and fees vary by state.

Estimated yearly difference

$0

Per yearSole owner / LLCS-corp
Social Security and Medicare
Additional Medicare Tax
Federal unemployment (FUTA) and state unemployment$0
Extra S-corp costs$0
Change in federal income tax$0
Change in state income tax$0
Total compared
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    Estimate only. General information, not tax advice for your situation.

    How this calculator works

    1. 1

      Sole owner or single-member LLC

      Self-employment tax is 15.3% (12.4% Social Security up to the wage base, plus 2.9% Medicare) on 92.35% of your profit, as on Schedule SE. Half of it is deductible.

    2. 2

      S-corp

      Social Security and Medicare apply only to your salary: 7.65% from you and 7.65% from the company. The rest of the profit is paid as distributions, which have no payroll tax. The company also pays federal unemployment tax (0.6% of the first $7,000 in most states).

    3. 3

      Costs and income tax

      We subtract the extra costs, then estimate how the different deductions and the smaller QBI deduction change your income tax at the bracket you chose.

    Worked example

    Single filer, 2026, $100,000 profit, $50,000 salary, no other job, 22% bracket, $600 payroll service and $800 for the extra return.

    Self-employment tax as a sole owner$14,130
    S-corp payroll taxes (7.65% + 7.65% on $50,000, plus $42 FUTA)$7,692
    Extra S-corp costs$1,400
    Higher income tax, mostly from a smaller QBI deduction$2,516
    Estimated yearly savings$2,521

    Without the QBI effect, the savings would look like $4,642. That gap is why the QBI deduction belongs in the comparison. Made-up numbers.

    What it includes, and what it doesn't

    • Social Security wage base: $184,500 for 2026 and $192,300 for 2027
    • Additional Medicare Tax of 0.9% above $200,000 ($250,000 joint)
    • W-2 wages from another job, which can use up the wage base
    • The QBI deduction effect for owners under the 2026 income threshold
    • Not included: retirement plan contributions, health insurance for S-corp owners, credits, state rules that tax S-corps directly, or QBI limits above the threshold
    • It doesn't decide what a reasonable salary is for you; that depends on the work you do
    • For 2027, income tax effects use your chosen bracket; the IRS hasn't published 2027 brackets yet
    Is an S-corp worth it at my profit level?

    It depends on profit, salary, other wages and costs. As a rough guide, the payroll tax savings often don't cover the extra costs until profit is well above the salary you would need to pay yourself. Run your numbers above, then look at the QBI line.

    What is a reasonable salary?

    The IRS expects an S-corp owner who works in the business to take wages that fit the services provided, before taking distributions. Factors include your duties, time spent and what similar businesses pay for the same work.

    Why does a W-2 job change the result?

    Social Security tax stops at the wage base. If your day job already pays wages near or above it, self-employment tax on your business is mostly Medicare, so an S-corp saves less, and the company still owes its 6.2% on your salary.

    Why can my income tax go up with an S-corp?

    The QBI deduction is 20% of qualified business income. Your S-corp salary is not qualified business income, so paying yourself a salary shrinks the deduction.

    Sources

    Built and reviewed by Taz, U.S. tax preparer. Last reviewed November 1, 2026.

    Already have an S-corp?

    The S-Corp Savings Audit checks your salary, payroll, reimbursements and books against your real numbers.

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