S-Corp Tax Savings Calculator
Estimate the self-employment tax you would save by electing S-Corp treatment, net of payroll and compliance costs, based on your net profit and reasonable compensation.
An S-Corp tax savings calculator estimates the employment tax difference between default pass-through taxation, where all net profit is subject to self-employment tax, and S-Corp taxation, where only reasonable W-2 wages are subject to payroll tax. The saving is 15.3% on the amount characterized as distribution up to the Social Security wage base, and 2.9% to 3.8% above it. An S election reduces employment tax only, never income tax.
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Estimated Result
This estimates employment tax only. An S election does not reduce income tax. Two factors can reverse the answer: an unsupported wage invites a reasonable compensation adjustment with back payroll tax, penalties, and interest across every open year; and above the Section 199A taxable income thresholds, the qualified business income deduction for a non-service business is limited by W-2 wages, so a lower salary can cost more in lost deduction than it saves in payroll tax. State payroll taxes, unemployment insurance, and state entity-level fees are not included.
Frequently Asked Questions
At what profit does an S-Corp election make sense?
Generally once net profit reliably exceeds roughly $60,000 to $80,000 per owner. Below that, the added cost of a separate 1120-S return, payroll processing, and state filings tends to exceed the employment tax saved.
What reasonable compensation should I enter?
The amount a comparable business would pay someone else to do what you do, priced from Bureau of Labor Statistics wage data and industry surveys and blended across the roles you actually perform. There is no 60/40 rule and no safe harbor percentage anywhere in the Code or IRS guidance.
Does an S-Corp reduce my income tax?
No. Profit is taxed at the same ordinary rates either way. The election reduces self-employment and payroll tax only.
Should I put rental property in an S-Corp?
Generally no. Rental income is not subject to self-employment tax, so there is nothing to save, and distributing appreciated property out of an S corporation triggers gain as though it had been sold at fair market value.
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