S Corp Tax Calculator: Is an S Corp Worth It?

2026 tax year

Compare your 2026 federal taxes as a sole proprietor and as an S corporation paying you a reasonable salary: payroll taxes, income tax and the QBI deduction, net of the extra costs of running an S corp.

Try an example

Your business

What your Schedule C would show as a sole proprietor: income minus business expenses.

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Your W-2 salary, before any 401(k) deferral. You choose it; see the note below.

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The IRS requires a reasonable salary before any distributions, and can reclassify distributions as wages. One of the factors it lists is what comparable businesses pay for similar services, so use what someone doing your job would earn on the market. There's no safe percentage.

Payroll service, Form 1120-S preparation, bookkeeping, state fees and franchise taxes, state unemployment tax.

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Check your state: some tax S corps at the entity level or charge minimum franchise taxes, and a few don't recognize the federal S election. Add what yours charges here.

Your return

Optional.

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Optional. Interest and other income.

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Only matters above about $201,750 of taxable income ($403,500 joint), where the QBI deduction phases out. Service businesses lose it faster. Not sure? Keep the first choice, which gives the higher tax.

Sole proprietor vs. S corp

Net savings with an S corp

$0

ItemSole propS corp
Self-employment tax$0$0
Payroll taxes (FICA + FUTA)$0$0
Additional Medicare Tax$0$0
QBI deduction (already in income tax)$0$0
Federal income tax$0$0
Extra S corp costs$0$0
Total$0$0
Break-even profit at this salary and cost
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Most you could spend on extra costs and break even
$0

Solo 401(k) changes too

As an S corp, the employer contribution becomes 25% of your W-2 salary, not about 20% of your self-employment profit. A lower salary means less room: $0 as a sole proprietor vs. $0 as an S corp at this salary (employer part only; the employee deferral is the same).

Health insurance: if you own more than 2% of the S corp, the corporation must pay your health insurance premiums and include them in your W-2 wages for you to deduct them, per the IRS.

How the numbers are figured
    This calculator gives a general estimate for educational purposes only. It isn't personalized financial, tax or legal advice, and it's no substitute for a CPA before you elect S corp status. It covers federal taxes only and leaves out state income and franchise taxes, state unemployment tax (add them to the extra costs), health insurance, retirement contributions, credits and itemized deductions. It assumes the full 5.4% FUTA credit, which you don't get in a credit reduction state. Above the QBI income threshold it applies the phase-out of Form 8995-A, counting your salary as W-2 wages on the S corp side; the rules for specified service businesses can change the answer a lot, so pick your type of work in the form. A lower salary also means lower Social Security earnings on your record, which can reduce your future benefits. Read the full Financial Disclaimer.

    Related guides

    Sources

    The official, primary sources behind the figures and rules on this page.

    1. 1IRS: Publication 15 (2026), Employer's Tax Guide (PDF)
    2. 2IRS: Instructions for Form 940 (FUTA) (PDF)
    3. 3IRS: Questions and answers for the Additional Medicare Tax
    4. 4IRS: S corporation compensation and medical insurance issues (reasonable compensation, 2% shareholder health insurance)
    5. 5IRS: Instructions for Form 8995 (QBI deduction) (PDF)
    6. 6IRS: 2026 Form 1040-ES, Estimated Tax for Individuals (PDF)
    7. 7IRS Topic no. 560, Additional Medicare Tax
    8. 8IRS: Rev. Proc. 2025-32, 2026 inflation-adjusted items incl. section 199A thresholds (PDF)
    9. 9IRS: Schedule SE (Form 1040), Self-Employment Tax (PDF)
    10. 10IRS: Publication 560, Retirement Plans for Small Business