S Corp Tax Calculator: How Much Could an S Corporation Save You?
Calculate your S corp tax savings
Enter your business profit and the salary you would reasonably pay yourself. Results update as you type.
Compares Social Security and Medicare tax only: 15.3% self-employment tax on 92.35% of profit versus payroll tax on salary. Ignores the 0.9% additional Medicare tax, income-tax effects (including the QBI deduction), retirement contributions and state taxes. The salary must be reasonable for the work you do. Estimates only, not tax advice.
Talk through your numbers on a free Discovery Call →How does an S corp save self-employment tax?
- Sole proprietor or single-member LLC: self-employment tax is 15.3% on 92.35% of net profit: 12.4% Social Security up to the wage base ($184,500 in 2026, $192,300 in 2027) plus 2.9% Medicare on all of it.
- S corporation: you are an employee of your company. Social Security and Medicare apply to your salary (half paid by the company, half withheld from you). Profit paid out as distributions is not subject to those taxes.
- The savings are roughly 15.3% of the profit you take as distributions instead of salary, up to the wage base, minus the cost of payroll and a separate S corp return.
What counts as a reasonable salary?
There is no fixed percentage. Reasonable compensation is what a business would pay someone else to do your job. Factors the IRS and courts look at include:
- Your training, experience, duties and time spent.
- What comparable businesses pay for similar services.
- The company’s gross receipts and how much of its income comes from your personal work.
- Your history of salary and distributions.
Document how you set the number, for example with salary surveys for your role and region, and revisit it as the business grows.
Illustrative example: $150,000 of profit
Illustrative example — consultant with $150,000 of net profit in 2026
- As a single-member LLC: self-employment tax on $138,525 (92.35% of profit) = about $21,194.
- As an S corp paying a $60,000 salary: payroll tax of 15.3% on $60,000 = $9,180.
- Difference: about $12,014. After an assumed $2,000 of extra costs: about $10,014 a year.
Figures are illustrative only; your result depends on your facts.
When does an S corp not make sense?
- Low or uneven profit. The fixed costs of payroll and an extra return can eat the savings.
- Rental real estate. Rental income generally isn’t subject to self-employment tax anyway, and taking appreciated property out of an S corp can trigger tax. Rentals usually belong in an LLC taxed as a partnership or disregarded entity.
- State costs. Some states and cities tax S corps directly or don’t recognize the election. Georgia recognizes S corps; check your own state.
- Other trade-offs. A lower salary can reduce Social Security benefits, retirement plan contributions based on W-2 pay, and the QBI deduction calculation.
How do you elect S corp status?
An LLC or corporation elects by filing Form 2553, generally within 2 months and 15 days of the start of the tax year the election should take effect. Late-election relief is often available. Once elected, you run payroll for yourself and file Form 1120-S each year. Read more in our S corp election guide.
How to get started
We help business owners decide whether an S corp fits, set a defensible salary and pair it with strategies like the Augusta rule. Book a free Discovery Call with Roger T. Herring, MSCTA, or call (678) 690-5228.
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Roger T. Herring, MSCTA
The Citadel ’91, former U.S. Army Reserve officer, and a corporate career from staff accountant to CFO before founding Investors Accounting to help real estate investors keep more of what they earn. Author of Real Estate Tax Killers, The Real Estate Investing Tax Blueprint and Secrets of the Short Term Rental.
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