S-Corp Tax Calculator
Calculate S-Corp tax savings. SE tax applies only to the owner-employee salary, not to distributions. Compare your savings vs sole proprietor.
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Quick:
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Must be "reasonable" β typically 40β60% of profit
$37,245
Total Tax (S-Corp)
$9,180
FICA on Salary
$90,000
Distributions (no SE tax)
$8,235
SE Tax Savings vs LLC
S-Corp Tax Breakdown
| Item | Amount |
|---|---|
| Total Business Profit | $150,000 |
| Owner Salary | $60,000 |
| Distributions | $90,000 |
| Employee FICA (7.65% on salary) | $4,590 |
| Employer FICA (7.65% on salary) | $4,590 |
| Salary deductible to S-Corp | $64,590 |
| QBI Deduction (~20% of dist) | -$18,000 |
| Income Tax (est.) | $23,475 |
| Total Tax (FICA + Income) | $37,245 |
How S-Corp Tax Savings Work
In an S-Corp, you pay FICA (Social Security + Medicare) taxes only on your salary. The remaining profit passes through as a distribution β taxed only as ordinary income, with no 15.3% SE tax. This is the primary tax advantage of an S-Corp election.
Formula
FICA = Salary Γ 15.3% (split equally employee/employer)
Distributions = Profit - Salary - Employer FICA
Total Pass-Through = Salary + Distributions
Income Tax = (Pass-Through - Deductions) Γ Bracket Rates
Distributions = Profit - Salary - Employer FICA
Total Pass-Through = Salary + Distributions
Income Tax = (Pass-Through - Deductions) Γ Bracket Rates
Example
$150K profit, $60K salary, MFJ:
FICA (both sides) = $60,000 Γ 15.3% = $9,180
Distributions = $150,000 - $60,000 - $4,590 = $85,410
vs LLC: SE Tax = $150K Γ 92.35% Γ 15.3% = $21,230
SE Tax Savings = $21,230 - $9,180 = ~$12,050
FICA (both sides) = $60,000 Γ 15.3% = $9,180
Distributions = $150,000 - $60,000 - $4,590 = $85,410
vs LLC: SE Tax = $150K Γ 92.35% Γ 15.3% = $21,230
SE Tax Savings = $21,230 - $9,180 = ~$12,050
Extended
Salary vs Distribution Optimizer
Find the optimal salary-to-distribution split for your S-Corp
Salary / Distribution Optimizer
Move the salary slider to find your optimal split and minimize total tax.
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| Salary % | Salary | FICA | Total Tax | Savings vs LLC |
|---|
MFJ filing, no other income assumed. Includes compliance cost savings estimate.
Frequently Asked Questions
How does an S-Corp save on self-employment tax?
S-Corp shareholders who work in the business pay SE (payroll) tax only on their reasonable salary. The remaining profit is distributed as a dividend, which is not subject to the 15.3% SE tax β only income tax.
What is a "reasonable salary" for an S-Corp?
The IRS requires S-Corp owner-employees to pay themselves a "reasonable" salary comparable to what they'd pay a non-owner for the same work. Setting salary too low is a red flag for IRS audits.
What are the costs of running an S-Corp?
S-Corps require additional payroll setup (quarterly 941s, W-2s), potentially a payroll service ($500β$2,000+/year), and more complex tax filing (Form 1120-S, ~$500β$2,000 CPA fee). These costs reduce the net savings.
When does an S-Corp election make sense?
Generally, S-Corp election becomes beneficial when your net business income exceeds approximately $40,000β$50,000 per year. Below this, the compliance costs often outweigh the SE tax savings.
Can any LLC elect S-Corp status?
An LLC can elect S-Corp taxation by filing Form 2553, but must meet S-Corp eligibility requirements: no more than 100 shareholders, all shareholders must be US citizens/residents, and only one class of stock is allowed.