S-Corp Tax Savings Calculator (2026)
Filing a Schedule C means 15.3% self-employment tax on nearly every dollar of profit. Electing S-Corporation status lets you split profit into a reasonable W-2 salary (taxed for Social Security & Medicare) and distributions (not subject to payroll tax). Use the inputs below to estimate what that could save you per year, net of S-Corp costs, at 2026 rates.
A percentage is only a starting point. Our S-Corp engagements include a documented reasonable-compensation determination built from your actual duties, hours, and local wage data.
Estimate only. This tool models the difference in Social Security and Medicare (self-employment vs. payroll) tax, minus the S-Corp cost figure you enter (when included), and does not calculate federal or state income tax, the qualified business income (QBI) deduction, or the additional 0.9% Medicare tax. Actual S-Corp operating costs vary by provider. “Reasonable compensation” must reflect the fair value of services performed and is subject to IRS scrutiny — a percentage is a starting point, not a rule. Figures use 2026 tax rates ($184,500 Social Security wage base). This is general information, not tax advice. For advice specific to your situation, contact Hopkins CPA Firm P.C..
How the math works
On a Schedule C, essentially all of your net profit (92.35% of it) is hit with 15.3% self-employment tax — 12.4% Social Security (on the first $184,500 in 2026) plus 2.9% Medicare, on top of income tax. In an S-Corporation, only your W-2 salary is subject to those payroll taxes. Remaining profit flows to you as a distribution, free of Social Security and Medicare tax. The savings scale with the gap between your profit and your salary — which is exactly why the IRS requires the salary to be reasonable.
What this calculator deliberately leaves out — QBI-deduction interplay, the extra 0.9% Medicare tax above $200,000, payroll and tax-prep costs, and retirement-plan strategy — is what we cover in a full analysis, because those factors can move the answer in either direction.
Frequently asked questions
How much self-employment tax does an S-Corp save?
A sole proprietor pays 15.3% self-employment tax on about 92.35% of net profit. An S-Corp owner pays Social Security and Medicare (FICA) only on their W-2 salary — profit distributions above that salary avoid the 15.3%. On $120,000 of profit with a $30,000 salary, that is roughly $12,000 per year before S-Corp operating costs.
What is a “reasonable compensation” salary?
The IRS requires S-Corp owner-employees to pay themselves a salary reflecting the fair market value of the work they actually perform before taking distributions. Set it too low and the IRS can reclassify distributions as wages — with back payroll taxes and penalties. Duties, hours, experience, and industry pay data all matter, which is why this number deserves professional support.
When is the S-Corp election due?
For an existing business, Form 2553 is generally due by March 15 to take effect for that calendar year. A new entity has 2 months and 15 days from formation. If you have missed the deadline, late-election relief is often available under IRS procedures — we handle these filings regularly.
Does Texas tax S-Corporations?
Texas has no personal income tax, so the federal payroll-tax savings are not offset at the state level. S-Corps are subject to the Texas franchise tax, but most small businesses fall under the no-tax-due revenue threshold (about $2.5 million) and owe $0 — an annual information filing is still required.
Is an S-Corp right for you? Below roughly $50,000 of annual profit, payroll and filing costs usually eat the savings — and above it, the election typically pays for itself many times over. Call or text (361) 360-3855 for a quick fit check before you file anything.