How to use the S corp tax calculator
- Enter your business profit before paying yourself.
- Enter the reasonable salary you'd pay yourself as an S corp employee.
- Choose your filing status and state tax rate.
- Enter the extra costs of running an S corp: payroll service, extra tax return, state fees.
Where the savings come from
| Sole prop / LLC | S corp | |
|---|---|---|
| Social Security & Medicare | $16,955 (SE tax on 92.35% of profit) | $9,180 (payroll tax on $60,000 salary) |
| Federal income tax | lower QBI base | similar |
| Extra costs | — | $2,500 |
| Total | $32,923 | $29,879 |
The S corp's payroll tax is on the salary only. The rest of the profit, about $52,900 after the salary, the employer half of payroll tax and extra costs, comes to you as a distribution free of Social Security and Medicare tax.
Salary is the key decision
| Salary | S corp total | Savings |
|---|---|---|
| $36,000 | $25,547 | $7,376 |
| $48,000 | $27,713 | $5,210 |
| $60,000 | $29,879 | $3,044 |
| $72,000 | $32,044 | $878 |
| $84,000 | $34,210 | −$1,287 |
A lower salary saves more, but the IRS requires a reasonable salary for the work you do. Base it on what similar roles pay, document how you chose it, and ask a CPA.
When an S corp makes sense
- Profit is steady and well above what a reasonable salary would be.
- You're ready for payroll, a separate 1120-S return and cleaner bookkeeping.
- Your state doesn't add costs that cancel the savings.
When profit is small or irregular, staying a sole proprietor or single-member LLC is usually simpler and cheaper. See your current tax with the LLC tax calculator or the 1099 tax calculator.
How to elect S corp status
An LLC or corporation elects S corp taxation by filing Form 2553 with the IRS, generally within 2 months and 15 days of the start of the tax year it should apply to. You'll then run payroll for your salary and file Form 1120-S each year.
Pay yourself the smart way
Whether you're a sole proprietor or an S corp, a steady pay plan keeps taxes covered. Read how to pay yourself as a small business owner and our guide to quarterly estimated taxes. Till is a small business profit planner that splits every sale into costs, tax set-aside and owner's pay. Try the free demo.
A 2026 federal estimate using the standard deduction and QBI deduction; not tax advice. Talk to a CPA before electing S corp status.
Frequently asked questions
How does an S corp save taxes?
How much does an S corp save at $120,000 of profit?
What is a reasonable salary?
At what income does an S corp make sense?
What extra costs come with an S corp?
Does the QBI deduction change?
Written by
Finance Specialist & Editor, VaultlyApps
Emma Whitfield writes and edits the VaultlyApps money guides and free calculators. Her focus is US household finance — budgeting on a real paycheck, paying down credit card and student debt, emergency funds and savings goals, renting — and the money side of freelancing and small-business income, from pricing and profit margins to self-employment tax. Every guide is researched against primary sources such as IRS publications and the CFPB, every number is checked in our tested calculators, and tax content is reviewed each year when new IRS figures come out. Emma is not a licensed financial adviser or tax preparer; her work is general education, not personal advice.
Researched against primary US sources, checked against independent calculators and reviewed by a finance expert on our team. Written for US readers — general education, not financial, tax or legal advice. Editorial policy · Disclaimer
