Slide your numbers and see what an S-Corp election would actually save in employment tax — using the 2026 wage base, honest costs, and none of the slogan math.
2026 figures: 15.3% SE/FICA up to the $184,500 Social Security wage base, 2.9% Medicare above it, +0.9% Additional Medicare over $200,000. Educational estimate — not personalized tax advice.
A sole proprietor (or default LLC) pays self-employment tax on essentially all business profit: 15.3% up to the 2026 Social Security wage base of $184,500, then 2.9–3.8% Medicare beyond it. An S-Corp owner pays FICA only on the salary they run through payroll; remaining profit comes out as distributions, free of employment tax. The savings are the gap — minus what the S-Corp costs you to operate.
The salary slider matters most, and it is not freely yours to choose: the IRS requires reasonable compensation for the work you actually do. Set it at what you would pay a stranger to do your job — for most owner-operators that lands between 35% and 60% of profit. A $20,000 salary on $200,000 of profit is how S-Corp audits start.
The costs slider should include a payroll service (roughly $500–800/year), the extra cost of an 1120-S return over a Schedule C (often $500–1,500), and any state fees.
State taxes on S-Corps. California charges 1.5% of net income (minimum $800); other states have franchise taxes or don’t recognize the federal savings the same way. This is the most common reason the real answer differs from the federal math.
The QBI deduction. The 20% qualified business income deduction interacts with salary in both directions — salary reduces QBI but can also unlock the deduction at higher incomes. It usually shifts the result modestly; occasionally it flips a close call.
Retirement contributions. Employer retirement contributions key off W-2 salary in an S-Corp. A low salary saves payroll tax but shrinks your Solo 401(k) or SEP ceiling — see the retirement plan comparison.
The half-SE-tax deduction and other income-tax-side effects roughly wash between the two structures for most people, which is why employment tax is the honest place to compare.
The election (Form 2553) is due March 15 for the current calendar year. If the calculator shows meaningful savings, the move is: confirm the math with someone who can see your state and your full return, then file once — not mid-year, not retroactively in a panic. The S-Corp vs LLC article walks the full decision.
Foad is a federally licensed Enrolled Agent who writes about tax and bookkeeping for small businesses.