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Is an S-corp worth it? 2026 calculator

For profitable LLC owners and sole proprietors: this shows whether electing S-corp status would lower your total tax. It compares self-employment tax with payroll tax on a reasonable salary, after the real costs of payroll, the extra tax return and state S-corp taxes.

Last updated October 28, 2026 · 2026 federal rates

S-corp running costs
Set up S-corp payroll

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How it works

As a default LLC you pay 15.3% self-employment tax on 92.35% of your profit (the Social Security part stops at $184,500 in 2026; Medicare continues, plus 0.9% Additional Medicare above $200,000 single / $250,000 joint). As an S-corp you pay the same 15.3% only on your salary; the rest comes out as distributions with no payroll tax.

In exchange you pay for payroll, federal and state unemployment tax on your salary, a separate business tax return, and in some states an entity-level tax. Salary also doesn't count toward the 20% QBI deduction, which the calculator subtracts. The break-even profit keeps your salary at the same percentage of profit, but never below $40,000 (or all of the profit, if that is less).

Frequently asked questions

At what profit does an S-corp make sense?

With our default salary (60% of profit, at least $40,000), our 2026 model breaks even at roughly $57,000–$65,000 of profit once payroll and the extra tax return are paid for (about $60,000 for a single filer in Florida or Texas, $57,000 married filing jointly). That fits the common rule of thumb that an S-corp starts to make sense somewhere around $40,000–$80,000 of profit. Savings stay modest for single filers because salary doesn’t count toward the 20% QBI deduction. Higher state costs push break-even up: California’s 1.5% S-corp tax and 1.3% SDI on salary (about $65,000), Illinois’s 1.5% replacement tax (about $64,000), and in New York City the S-corp pays the 8.85% General Corporation Tax while a small LLC often owes little Unincorporated Business Tax, so it may not pay off until about $120,000. A lower salary than ours lowers break-even, but only if you can justify it to the IRS.

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

The IRS requires S-corp owners who work in the business to pay themselves reasonable compensation: roughly what the business would pay someone else to do the job, considering training, duties, time spent and what similar businesses pay. There is no fixed percentage. Our default of 60% of profit with a $40,000 minimum is a deliberately cautious starting point; replace it with a market salary for your role.

How much tax does an S-corp save?

An S-corp avoids the 15.3% self-employment tax on profit you take as distributions rather than salary, but salary doesn’t count toward the 20% QBI deduction. On $100,000 profit in Florida, our model estimates about $1,100 a year in net savings for a single filer at our default $60,000 salary (about $2,400 married filing jointly), or about $2,900 at a $50,000 salary, after $660 payroll and $903 extra tax prep.

What does an S-corp cost to run?

Payroll software (about $500–$1,500 a year), a separate Form 1120-S business return (NSA survey average $903), federal and state unemployment tax on your salary, and in some states an entity-level tax such as California's 1.5% (minimum $800). Some states also have employee-paid payroll taxes on your salary, like California SDI at 1.3%.

Does the S-corp reduce my QBI deduction?

Yes. Salary you pay yourself is not qualified business income, so the 20% QBI deduction shrinks. The calculator includes this. For 2026 there is also a new $400 minimum QBI deduction if you have at least $1,000 of QBI.