S-Corp Savings Calculator
Estimate the self-employment tax savings of electing S-Corp status. Enter your net business income, a defensible reasonable salary, and your state to see net annual savings after payroll cost and state fees.
Annual net profit before any owner pay.
A defensible market rate for your role and duties. The IRS expects this to reflect what you would pay an unrelated employee for the same work. Service businesses commonly land at 30 to 60% of net income.
Affects Additional Medicare Tax threshold and federal income tax brackets.
Estimated Net Annual Savings
$9,073
Roughly $756 per month after payroll cost and state minimum tax.
As Sole Prop / SMLLC
$47,249
SE tax + federal income tax
As S-Corp
$38,176
Payroll tax + income tax + extra cost
- SE / payroll tax saved
- $12,014
- Income tax difference
- -$1,442
- Payroll service est.
- $1,500
- State minimum / fee
- $0
- W-2 wages
- $60,000
- Distribution (no payroll tax)
- $90,000
Free. No obligation. We respond the same day.
How the S-Corp Election Saves You Money
A sole proprietor or single-member LLC pays self-employment tax of 15.3% on the first $184,500 of net earnings from self-employment in 2026, then 2.9% Medicare on everything above that. Net earnings are 92.35% of net profit, so the cap starts to bind around $199,800 of profit. An S-Corp election splits compensation into W-2 wages (subject to payroll tax) and distributions (not subject to payroll tax), keeping the same income tax outcome.
The savings come from the distribution portion, where payroll tax is avoided. The catch is the IRS reasonable salary requirement: the wage portion must reflect what you would pay an unrelated employee to do your job. A defensible salary plus the cost of payroll service and state minimum taxes is the offset against the gross SE tax savings.
Most owner-operators see meaningful net savings starting around $50,000 to $80,000 of consistent net profit, increasing significantly as profit grows. Above $200,000, savings of $10,000+ annually are common.