S-Corp Tax Savings Calculator

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Peer reviewed by a tax professionalReviewed bya tax professionalThis content has been reviewed by an Enrolled Agent (EA) with the IRS — the highest credential awarded by the agency. Enrolled Agents are empowered to represent all taxpayers before the IRS, on all types of tax-related matters. Accountants who earn this certification have passed a comprehensive three-part exam on individual and business tax returns. To maintain EA status, they must stay up to date in the field by completing 72 hours of continuing education every three years.

How to calculate your S-Corp tax savings

Electing to be taxed as an S-Corporation (S-Corp) can help self-employed people reduce their tax bill, especially when it comes to self-employment taxes. Here’s a step-by-step guide on how S-Corp tax savings work and how to calculate your potential benefit.

Step-by-step example

1. Calculate your net income. This is your business profit — your total revenue minus your business expenses. For example: net income = $100,000.

2. Estimate your self-employment tax as a sole proprietor. If you’re taxed as a sole proprietor or single-member LLC, you’ll pay self-employment tax (15.3%) on your net income. Example: $100,000 × 15.3% = $15,300 in self-employment tax.

3. Set a reasonable salary. When you’re taxed as an S-Corp, the IRS requires you to pay yourself a reasonable salary. Make sure to set a defensible salary; otherwise you risk an audit by the IRS. That salary is subject to the same 15.3% payroll tax, but any remaining profit is not — it’s considered a distribution and avoids self-employment tax. For example: reasonable salary = $60,000, distribution = $40,000. You’ll only pay payroll tax on the salary: $60,000 × 15.3% = $9,180.

4. Compare the tax difference. As a sole proprietor, you’d pay $15,300 in self-employment tax. As an S-Corp, you’d pay $9,180 in payroll tax. That’s a tax savings of $6,120.

Need more help?

• Check out our guide on all things S-Corp and whether you should elect as one.
• Or book a consultation with a Keeper tax pro to discuss the pros and cons. Your first consultation is free when you activate a free trial on the premium plan.

Limits to this calculation

This calculator gives you a quick estimate — but a few factors can affect your actual tax savings:

QBI deduction (Section 199A)

The Qualified Business Income (QBI) deduction allows many self-employed people to deduct up to 20% of their business profit from their taxable income. When you elect S-Corp status, your reported profit is lower (because you’re paying yourself a salary), so your QBI deduction may be smaller.

Administrative costs

Running an S-Corp involves more administrative complexity. You’ll need to run payroll, file quarterly payroll tax forms, and submit a separate corporate tax return (Form 1120-S). Many business owners also hire a bookkeeper or use a payroll provider. These services can cost anywhere from $1,000 to $3,000 per year, which reduces your net savings.

The Social Security wage base

The 12.4% Social Security portion of self-employment tax only applies to income up to the annual wage base ($176,100 for 2025). Above that, only the 2.9% Medicare portion applies. This calculator accounts for the cap, so once your income climbs past the wage base, converting salary to distributions saves you less on the Social Security side than a flat 15.3% would suggest.