Estimate your S-corp tax savings.

How does an S-corp save you taxes?

An S-corp lets you split your business profit into a reasonable W-2 salary (subject to FICA payroll taxes) and distributions (not subject to self-employment tax). On a sole-proprietor return, the entire net profit is hit with 15.3% self-employment tax up to the Social Security wage base, plus 2.9% Medicare on the rest. With an S-corp, only the salary portion is subject to FICA. The savings is the SE tax on the distribution portion.

At what income level does an S-corp start to make sense?

Typically around $60,000 to $80,000 in net profit. Below that, the annual overhead of running an S-corp (payroll, separate tax return, registered agent) usually exceeds the SE tax savings. Above $100,000 in net profit, the S-corp election almost always pays off. The exact crossover depends on your reasonable salary percentage.

What is a reasonable salary for an S-corp owner?

The IRS requires that S-corp owners pay themselves a salary that reflects what someone with similar skills, in a similar role, in a similar geography would earn. For most service businesses, this lands between 35% and 50% of net profit. The salary must be defensible with comparable wage data — not just a number you pick to minimize FICA.

Is this calculator's result the actual amount I will save?

No. This is a rough estimate of self-employment tax savings only. It does not account for state taxes, the additional cost of running payroll, your specific filing situation, retirement contribution effects, or QBI deduction interactions. Use it to size the opportunity, then talk to a tax professional before electing.

When is the deadline to elect S-corp status for the current tax year?

Form 2553 must generally be filed within 2 months and 15 days of the start of the tax year you want the election to take effect. For a calendar-year business, that is March 15. Late elections are sometimes accepted with reasonable cause. If you miss the deadline, you can elect for next year.