A starting point for a conversation with Dan Marlow, CPA
S Corp Tax Savings Calculator
Compare the 2026 payroll-tax side of a sole proprietorship and an S corporation. Start with profit before owner pay, add a defensible salary and extra administration costs, then account for other wages if they apply. You'll see both the tax difference and where the business profit goes.
Your estimate shows here after you run the numbers.
What This Calculator Doesn't Count
This is an educational payroll-tax comparison, not a full tax-savings estimate. It doesn't calculate federal income tax, deductions for payroll or self-employment taxes, the qualified business income deduction, state or local taxes, retirement contributions, health insurance, or unemployment taxes. It can't determine reasonable compensation or whether an S corp election fits your business.
The ordinary self-employment calculation uses 92.35% of profit, with no self-employment tax when that net-earnings amount is below $400. For 2026, Social Security is 12.4% combined on the applicable earnings up to the $184,500 wage base. Regular Medicare is 2.9% combined without a wage cap. Employer and employee payroll shares are shown separately.
Additional Medicare Tax is 0.9% above $200,000 for single, head-of-household and qualifying surviving spouse filers; $250,000 for married filing jointly; or $125,000 for married filing separately. There's no employer match. The tool models annual liability, not an employer's withholding schedule. Results are rounded to whole dollars for display.
The model covers one owner and one business, with ordinary self-employment earnings or wages subject to Social Security and Medicare. It doesn't handle other businesses owned by this person, losses, optional Schedule SE methods, farm or church exceptions, railroad compensation, or related-employer arrangements. A $0 salary entry doesn't confirm that no salary is required. Review the definitions with your advisor before relying on the result.
Sources checked September 22, 2026: IRS 2026 payroll rates; IRS self-employment tax overview; IRS Additional Medicare Tax instructions; IRS excess Social Security withholding guidance; IRS reasonable compensation guidance.
Want to follow the numbers first? Read the hypothetical contractor S corp example, then use the example button in the calculator to explore how different inputs change the comparison.
Common Questions
What's a reasonable salary?
The IRS requires reasonable compensation for services before non-wage distributions to a shareholder who works in the business. Duties, time, experience and comparable pay matter. The example's salary is an assumption, not a recommended salary or percentage of profit.
How do wages from another job affect the comparison?
Your own other Social Security wages reduce the remaining wage base for self-employment tax and your employee share of S corp Social Security tax. They don't reduce the S corp's employer share. The model assumes separate employers and shows the owner's annual burden after any eligible excess-withholding credit, which can differ from payroll withholding during the year.
Why does the calculator ask for filing status and spouse income?
Additional Medicare Tax depends on filing status and combined Medicare wages and self-employment earnings. On a joint return, a spouse's income can change that tax. It doesn't use up your personal Social Security wage base. The result shows only the Additional Medicare Tax attributable to this business, not tax already owed on outside income.
What if salary and costs exceed the profit I entered?
The result shows a funding shortfall when owner salary, employer payroll taxes and extra costs exceed the entered profit. That's a reason to reconcile the inputs and business finances. It isn't a reason to lower reasonable compensation just to make the comparison positive.
When doesn't an S corp make sense?
Payroll, filing costs, eligibility, compensation and the wider tax picture all matter. A small, zero or negative result here is a reason to review the assumptions; this limited model cannot decide whether to elect S corporation status.
What happens after I run the numbers?
Bring them to Dan. Valor's retainer covers your business return and your personal 1040, so the S corp decision gets planned with your whole tax picture in view.
Do these assumptions fit your business?
Discuss the business, your role and what a fuller review would need to cover with Dan Marlow, CPA. An estimate is the beginning of the conversation.