2026 Calculator
S-Corp Tax Savings Calculator
Compare S-Corp vs Sole Proprietor taxes
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FAQ
How does S-Corp save on taxes?
S-Corp owners pay themselves a reasonable salary (subject to 15.3% payroll tax) and take remaining profits as distributions (no SE tax). For example, on $150K profit: $75K salary pays ~$11,500 payroll tax, while $75K distribution has zero SE tax, saving ~$11,500 vs. sole proprietor.
What is a reasonable salary for S-Corp?
The IRS requires S-Corp owners to pay themselves a 'reasonable salary' comparable to what similar businesses pay for similar services. Factors include duties, time, training, and industry norms. Generally, 40-60% of net profit is a safe range, but this varies by situation.
When should I elect S-Corp status?
S-Corp election typically makes sense when net profit exceeds $40-50K annually. Below this threshold, the payroll costs, compliance burden, and accounting fees often outweigh the tax savings. Consult a CPA to analyze your specific situation.