Free tool · Small business owners
S Corp Tax Savings Calculator
Enter your profit and a salary you could defend as reasonable. See the estimated 2026 payroll-tax difference between a sole proprietorship or single-member LLC and an S corporation. Free, with no signup.
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Your result
Enter your profit and a salary, then select Compare 2026 taxes. Your side-by-side estimate appears here.
How the math works
How does the S corp calculation work?
The calculator compares two ways of paying Social Security and Medicare tax on the same business profit. It is a payroll-tax comparison, not a full income tax return.
- Sole proprietor or single-member LLC: self-employment tax is 15.3% (12.4% Social Security plus 2.9% Medicare) on 92.35% of net profit. The Social Security part stops at the 2026 wage base of $184,500.
- S corporation: you pay yourself a salary. The business and you each pay 7.65% FICA on that salary (6.2% Social Security up to $184,500 plus 1.45% Medicare). The business also pays federal unemployment tax (FUTA) of 0.6% on the first $7,000 of wages.
- The profit left after salary is taken as a distribution. Distributions are not subject to self-employment tax or FICA.
- Illinois: an S corporation pays 1.5% replacement tax on its net Illinois income. A sole proprietor does not. The calculator applies it to profit after salary, the employer share of payroll tax and the extra costs you enter.
- Extra S corp costs: you enter your own estimate of the cost of payroll processing and the separate S corporation tax return. The calculator does not guess it, so ask your CPA for a quote.
Not included: federal and state income tax, the deduction for half of self-employment tax, the qualified business income (QBI) deduction, retirement plan contributions, health insurance rules for 2% shareholders, Illinois state unemployment tax on wages, and the 0.9% Additional Medicare Tax that applies above $200,000 (single) or $250,000 (married filing jointly) of income. Those can move the real answer in either direction.
Reasonable compensation
What is a reasonable salary for an S corp owner?
The IRS requires an S corporation to pay a shareholder who works in the business reasonable compensation for the services they perform, before taking distributions. There is no fixed percentage or formula. The IRS says there are no specific guidelines for reasonable compensation in the Code or the Regulations, and it can reclassify distributions as wages.
This calculator does not tell you what your salary should be. You enter a figure, and it shows the tax effect. If the salary you enter is a small share of profit, the calculator warns you and suggests talking to a CPA.
Factors the IRS and courts look at
- Training and experience
- Duties and responsibilities
- Time and effort devoted to the business
- Dividend and distribution history
- Payments to non-shareholder employees
- What comparable businesses pay for similar services
- Compensation agreements
Read the IRS pages on S corporation compensation and medical insurance issues and the Wage Compensation for S Corporation Officers fact sheet (FS-2008-25).
Beyond the payroll tax
Is an S corp right for you?
Payroll-tax savings are only one part of the decision. An S corporation also brings costs and rules that a sole proprietorship does not have.
- Running payroll for yourself, with quarterly and annual payroll filings
- A separate business tax return (Form 1120-S) and a Schedule K-1 each year
- Illinois replacement tax of 1.5% on net income, if you operate in Illinois
- Rules on shareholders, one class of stock and how distributions are made
- Lower W-2 pay can reduce the base for retirement contributions and some other calculations
- The QBI deduction can change the tax on the profit that passes through
In general, an S corporation tends to make more sense as profit grows, and less sense for smaller profits where the added costs eat the savings. Use the calculator to test a few salary levels, then talk to a CPA before you elect S corporation status.
Related help: tax preparation, payroll services and small business accounting.
Where the rates come from (checked October 2026)
Sources and disclaimer
- SSA, Contribution and Benefit Base: 2026 Social Security wage base of $184,500, OASDI rates
- IRS Topic 554, Self-employment tax: 12.4% plus 2.9%, 92.35% of net earnings, Additional Medicare Tax thresholds, half-of-SE-tax deduction
- IRS Topic 759, FUTA: 6.0% rate, 5.4% credit, $7,000 wage base
- Illinois Department of Revenue, Pub-129 Pass-through Entity Information: 1.5% replacement tax on S corporations
- IRS, S corporation compensation and medical insurance issues
- IRS Fact Sheet FS-2008-25, Wage Compensation for S Corporation Officers
This is an estimate, not tax advice. It runs in your browser and nothing you enter is stored or sent. Rates change each year, and your real result depends on your whole tax situation. Confirm with a CPA before you make an S corporation election.
What happens next
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Free 20-minute call
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Written fee quote
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We handle it
Your CPA team takes it from there and keeps you posted until it is filed.
FAQ
S corp tax questions, answered
Still have questions? Ask them on a free 20-minute call.
How much can an S corp save in self-employment tax?
It depends on profit and salary. The savings come from the profit above your salary, which is not subject to self-employment tax or FICA. The calculator subtracts the extra costs you enter and, for Illinois, the 1.5% replacement tax, so the net can be small or even negative at lower profit.
What is the self-employment tax rate for 2026?
15.3%: 12.4% Social Security plus 2.9% Medicare, applied to 92.35% of net earnings from self-employment. The Social Security part applies only up to the 2026 wage base of $184,500 (IRS Topic 554, SSA).
What is a reasonable salary for an S corp owner?
There is no set percentage. The IRS looks at factors such as training and experience, duties, time devoted to the business, what comparable businesses pay and payments to non-owner employees. A CPA can help you document a figure you can support.
Is there a 60/40 rule for S corp salary?
No. You will see rules of thumb online, but the IRS says there are no specific guidelines for reasonable compensation in the Code or the Regulations. Treat any percentage as a starting point to discuss with a CPA, not a safe harbor.
What happens if my S corp salary is too low?
The IRS can reclassify distributions as wages and assess the payroll tax that went unpaid, plus penalties and interest. This calculator flags a salary that is a small share of profit so you can review it with a CPA.
Does an Illinois S corp pay replacement tax?
Yes. The Illinois Department of Revenue says S corporations and partnerships pay a 1.5% replacement tax on net income taxable to Illinois. Sole proprietors do not, which is why the calculator adds it to the S corp side when you pick Illinois.
What extra costs does an S corp have?
Common ones are payroll processing for your own salary, the separate S corporation return (Form 1120-S) and Schedule K-1, and Illinois replacement tax return filing. Enter your own estimate in the calculator and ask your CPA for a quote.
Does the calculator include the QBI deduction or income tax?
No. It compares Social Security, Medicare, FUTA and Illinois replacement tax only. The qualified business income deduction, income tax brackets, retirement contributions and health insurance treatment can change the real result.
Can a single-member LLC elect S corp status?
Yes. A single-member LLC is taxed as a sole proprietorship by default, but it can elect to be taxed as an S corporation if it meets the requirements. Talk to a CPA about timing and eligibility before you file the election.
Is this calculator tax advice?
No. It is a general estimate. It runs in your browser and nothing you enter is stored or sent. Your actual result depends on your full tax situation, so confirm with a CPA before you elect S corporation status.
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