Business owners

S-Corp Tax Savings Calculator

Compare self-employment tax as a sole proprietor or LLC with payroll tax as an S-corp, and see if the election is worth it for your business.

Updated for the 2026 tax year

Estimates only. These calculators use simplified assumptions, 2026 federal and North Carolina rules and the numbers you enter. They don't account for every type of income, deduction, credit or circumstance, so your actual results may be different. They are for general information and are not tax, legal or investment advice. Using them doesn't create a CPA-client relationship with Stancil. Talk with a CPA about your own situation before acting on a result. The calculations run in your browser, and the calculator doesn't send the numbers you enter to Stancil.

How an S-corp saves tax

As a sole proprietor or single-member LLC, your business profit is generally subject to self-employment tax. It's figured on 92.35% of net profit: 12.4% Social Security up to the 2026 wage base of $184,500 (reduced by any W-2 wages you have), plus 2.9% Medicare on all of it, and an extra 0.9% Medicare tax above $200,000 for single filers ($250,000 married filing jointly). With an S-corp election, you pay yourself a reasonable salary through payroll, and that salary has Social Security and Medicare tax. Remaining profit can be paid out as distributions, which generally don't carry payroll tax.

The catch: reasonable salary and extra costs

The IRS requires S-corp owners who work in the business to pay themselves reasonable compensation: what you'd pay someone else to do your job. Set it too low and you risk penalties on audit. An S-corp also adds costs: a payroll service, a separate business tax return (Form 1120-S), and in North Carolina, franchise tax and annual report fees.

When does an S-corp make sense?

Often once profit is steadily above about $50,000 to $80,000 a year, but it depends on your salary, industry and plans. Other factors matter too, such as the qualified business income (QBI) deduction, retirement plan contributions and state taxes.

Frequently asked questions

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

It's generally what you would pay someone else to do the work you do, based on factors like your duties, time spent, experience, industry and location. There's no IRS percentage or rule of thumb, and the salary you enter in this calculator isn't a recommendation. A CPA can help you set and document a salary based on your facts.

How do I elect S-corp status?

An LLC or corporation files IRS Form 2553. To take effect for the current year, it's generally due within 2 months and 15 days of the start of the tax year (March 15 for calendar-year businesses). Late election relief is sometimes available.

Does an S-corp lower income tax?

Not directly. Business profit still flows through to your personal return. The main savings are Social Security and Medicare taxes on the part of profit paid as distributions.