S Corp Tax Calculator

A single-member LLC or sole proprietorship pays self-employment tax on nearly all of its profit. An LLC or corporation that elects S corporation status pays the owner a salary through payroll, and only that salary carries Social Security and Medicare tax. The question this calculator answers is whether the payroll tax saved on the rest of the profit outweighs the extra costs and the smaller QBI deduction that come with the S corporation, for your profit, salary and filing status.

Where the saving comes from

Both totals include federal income tax, state income tax and, for the S corporation, the extra costs. Payroll taxes alone show why the structure is popular. Comparing self-employment tax on the whole profit with FICA on a salary of half the profit (2026):

The gap narrows above about $200,000, because the sole proprietor's 12.4% Social Security tax stops at $184,500 of net earnings while the salary keeps rising. The $300,000 row includes $693.45 of Additional Medicare Tax for a single filer.

Figures used for 2025 and 2026

The 2026 brackets and standard deduction come from Revenue Procedure 2025-32, which includes the P.L. 119-21 changes; the 2025 standard deduction is the amended $15,750 and $31,500. P.L. 119-21 also made the 20% QBI deduction permanent (it was due to expire after 2025), and from 2026 it widens the phase-in range and adds a $400 minimum deduction for owners with at least $1,000 of QBI from businesses in which they materially participate.

Worked example 1: $120,000 of profit, $60,000 salary

A single consultant expects $120,000 of profit in 2026, has no other income and pays 5% state tax. As a sole proprietor, self-employment tax is $16,955.46. Half of it, $8,477.73, is deductible, and the QBI deduction is $19,084.45, capped at 20% of taxable income before QBI. Federal income tax comes to $11,506.32 and state tax to $5,576.11, a total of $34,037.89.

As an S corporation paying a $60,000 salary, FICA is $9,180 (half from each side), FUTA $42 and state unemployment $189, and $1,800 of extra costs brings the K-1 profit to $53,379. The QBI deduction applies only to that K-1 profit, $10,675.80, so federal income tax rises to $13,764.70; state tax is $5,668.95. The S corporation total is $30,644.65, a saving of $3,393.24.

Worked example 2: $250,000 of profit and the QBI phase-in

At $250,000 of profit with a $110,000 salary, the sole proprietor owes $29,573.38 of self-employment tax plus $277.88 of Additional Medicare Tax. Taxable income before QBI is $219,113.31, inside the phase-in range, so with no W-2 wages the QBI deduction shrinks to $36,151.78. The S corporation pays $16,830 of FICA, keeps a $25,910.80 QBI deduction on $129,554 of K-1 profit, and totals $70,847.07 against $78,120.68: a saving of $7,273.62. For a specified service business such as consulting or accounting, the saving is $7,221.41.

Savings by profit and salary level

Computed for 2026 with no other income, a 5% state rate, $1,800 of extra costs, 2.7% state unemployment tax on $7,000, the QBI deduction and a business that is not a specified service business. Negative numbers mean the S corporation costs more.

Two effects bend the pattern. Above the wage base a higher salary adds FICA that the sole proprietor no longer pays, and every dollar of salary removes 20 cents of QBI deduction. For a single filer, taxable income above $201,750 starts phasing out a sole proprietor's QBI deduction when the business pays no W-2 wages, which is why the S corporation pulls ahead again at $300,000. Joint filers stay below the $403,500 threshold, so at higher profits the lost QBI on the salary dominates.

Reasonable compensation: what the IRS looks at

An S corporation must pay a shareholder who works in the business reasonable compensation before taking non-wage distributions, and the IRS can reclassify distributions as wages. Its list of factors: training and experience, duties and responsibilities, time and effort devoted, dividend history, payments to non-shareholder employees, timing and manner of bonuses, what comparable businesses pay for similar services, compensation agreements, and use of a formula. No percentage of profit appears anywhere in that guidance; the 40%, 50% and 60% columns above are a sensitivity check, not a safe harbor. A salary that matches what you would pay someone else to do your job is the defensible starting point. For the "comparable businesses" factor, the Bureau of Labor Statistics' Occupational Employment and Wage Statistics (OEWS) publish median and percentile wages by occupation, state and metro area; print the figures for your occupation and keep them with your payroll records.

Breakeven profit

The calculator also finds the lowest profit at which the S corporation starts saving money, keeping the salary at the same share of profit. With the default costs and a salary of half the profit, a single filer breaks even at about $29,200 in 2026 and a joint filer at about $30,600. At a 40% salary the single filer's breakeven drops to $23,600; at 60% it rises to $42,900. Raise the yearly extra costs to $3,000 and the 50% breakeven moves to $49,400, so real quotes matter more than any rule of thumb.

The costs and steps of an S corp

Expect a payroll service, quarterly payroll returns (Form 941) and an annual FUTA return (Form 940), a Form 1120-S corporate return due by the 15th day of the third month after year end, state unemployment registration and any state fees. To elect, file Form 2553 within 2 months and 15 days after the start of the tax year, or during the prior year. The corporation must be domestic, with no more than 100 shareholders, only allowable shareholders and one class of stock. The defaults in the calculator ($600 payroll service, $1,200 extra tax preparation) are assumptions to replace with real quotes.

How the QBI deduction changes the answer

The 20% deduction for qualified business income excludes reasonable compensation from an S corporation, so every dollar of salary moves out of the QBI base. Below the threshold this works against the S corporation, as example 1 shows. Above it, the deduction is limited to 50% of W-2 wages paid by the business, and the owner's own salary counts as W-2 wages. A sole proprietor with no employees has none, so the S corporation can preserve a deduction the sole proprietor loses. Specified service businesses lose the deduction entirely above the phase-in range under either structure.

How to use this calculator

1. Choose the tax year and filing status, and enter the profit before any pay to yourself.
2. Enter a reasonable salary, or use the 40%, 50% and 60% buttons as a starting point.
3. Add other household income and your state rate, then replace the cost defaults with your quotes and state unemployment rate.
4. Read the savings, the breakeven profit and the side-by-side table, and check the salary sensitivity table before settling on a number.

Key terms

• Self-employment tax: Social Security and Medicare tax on net earnings of a sole proprietor or partner, 15.3% on 92.35% of profit.
• FICA: the same taxes on wages, split 7.65% employer and 7.65% employee.
• Reasonable compensation: the salary a shareholder-employee must receive for services before distributions.
• K-1 income: the shareholder's share of S corporation profit, taxed on the personal return at individual rates.
• QBI: qualified business income, the base for the 20% deduction under section 199A.

Limitations

The model assumes the owner is the only worker, the business has no depreciable property for the QBI limit, and the standard deduction applies. It leaves out retirement plan contributions, health insurance for shareholder-employees, state entity-level taxes beyond the fee you enter and states that treat S corporations differently. It also ignores the long-term cost of a lower salary on Social Security benefits.

Related calculators

• For self-employment tax on its own, use the Self-Employment Tax Calculator; for the full federal return, the Income Tax Calculator.
• To check the payroll side of a salary, use the Payroll Tax Calculator or the FICA Tax Calculator.
• Business deductions reduce the profit you start from: see the Home Office Deduction Calculator, the Section 179 Calculator and the Depreciation Calculator.

Sources

• IRS, S corporation compensation and medical insurance issues: reasonable compensation and its factors.
• U.S. Bureau of Labor Statistics, Occupational Employment and Wage Statistics: wages by occupation, state and metro area for the comparable-pay factor.
• IRS, Topic no. 554, Additional Medicare Tax Q&A and Topic no. 759 (FUTA); SSA, Contribution and benefit base.
• IRS, Revenue Procedure 2025-32 (2026 brackets, standard deduction, QBI thresholds) and Revenue Procedure 2024-40 (2025 brackets and QBI thresholds).
• U.S. Government Publishing Office, Public Law 119-21, section 70105 (QBI changes); IRS, Qualified business income deduction.
• IRS, Instructions for Form 2553, Schedule A (Form 940) for 2025 and SSA, Social Security benefit amounts.