S Corp Tax Savings Calculator

2026 rules

See what an S corp election saves at your profit and salary, after the extra costs of running payroll.

Your numbers

Business profit before your pay

Reasonable salary you'd pay yourself

Extra yearly S corp costs (payroll service, filings, state fees)

Filing status

Result

Yearly savings as an S corp$4,978

Sole proprietor: SE + income tax$37,608
S corp: payroll taxes on salary (both halves)$10,710
S corp: FUTA$42
S corp: income tax on salary + distribution$19,378
S corp: extra running costs$2,500
S corp total$32,630
Savings$4,978

The IRS expects a salary comparable to what you'd pay someone else for the same work. State taxes on S corps vary and are not included.

How it works

As a sole proprietor, all profit owes self-employment tax. In an S corp you pay payroll tax only on your salary; the rest comes out as a distribution without Social Security or Medicare tax.

Running an S corp costs money: payroll processing, a separate tax return, and state fees. Savings tend to start once profit passes roughly $50,000 to $80,000.

2026 figures: IRS Rev. Proc. 2025-32 (2026 inflation adjustments); IRS Notice 2025-67 (2026 retirement plan limits); SSA 2026 COLA fact sheet; IRS Notice 2026-10 and Announcement 2026-11 (mileage).

Questions

How much salary is reasonable?

What you'd pay someone else for the same work, based on your role, hours and local pay. Very low salaries are a common audit issue.

Does a lower salary cut my retirement contributions?

Yes. Solo 401(k) employer contributions are 25% of salary, so a small salary also means a smaller contribution.