S corp tax savings calculator

An LLC can elect to be taxed as an S corporation. The owner then takes a salary through payroll and the rest of the profit as distributions, which carry no Social Security or Medicare tax. This S corp tax calculator shows how much that changes for your profit and salary, so you can weigh it against what running an S corp costs.

How it calculates

• LLC, default tax treatment: self-employment tax on the whole profit, as in the self-employment tax calculator: 12.4% Social Security up to $184,500 and 2.9% Medicare, on 92.35% of the profit, plus the additional Medicare tax above the threshold.
• LLC taxed as an S corp: payroll taxes on the salary, 6.2% Social Security up to $184,500 and 1.45% Medicare, withheld from you and paid again by the company (IRS Topic 751), plus the additional Medicare tax on salary above the threshold. The company's share comes out of the profit; what is left is paid as distributions with no payroll tax.
• The difference is the first minus the second. It is a saving in Social Security and Medicare tax only, before the costs of the S corp.

The salary must be reasonable

The IRS says an S corporation "must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made" (IRS: S corporation compensation). It looks at factors such as your training and experience, your duties and the time you spend, and what comparable businesses pay for similar services. Distributions paid in place of a fair salary can be treated as wages, with the payroll tax owed on them. The calculator takes your salary as given: it cannot tell you what is reasonable for your work.

Costs to weigh against the saving

These depend on your state and how you run payroll, so the calculator does not put a number on them:

• A payroll service or software, and the quarterly and yearly payroll filings it handles.
• Federal and state unemployment taxes on the salary, and state payroll accounts to open.
• A separate business tax return every year, Form 1120-S, with a Schedule K-1 for each owner, usually prepared by an accountant.
• State taxes or fees on S corporations, which some states charge and some states do not recognize the election at all (SBA: choose a business structure).

Assumptions and limits

• One owner who works in the business, with no other wages, and the profit before paying that owner. With several owners, run it for each owner's share.
• Social Security and Medicare tax only. Income tax changes too, through the deduction for half of self-employment tax, the company's payroll tax deduction and the qualified business income deduction, and those depend on your whole return.
• Retirement contributions, health insurance and state income tax are left out; each can move the result.
• Electing S corporation treatment takes Form 2553 and has eligibility rules and deadlines; LLC vs S corp explains them.

Sources

• IRS Topic 751, Social Security and Medicare withholding rates: 6.2% and 1.45% each for employee and employer.
• IRS Topic 554, Self-employment tax and Topic 560, Additional Medicare tax.
• IRS: S corporation compensation and medical insurance issues.
• Social Security Administration: the wage base of $184,500 for 2026.

General information, not legal or tax advice. Figures for tax year 2026, checked 2026-10-26 against the official sources above; talk to a tax professional before electing. How we check our facts · Report an error