Your Business Details
Your total business profit (revenue minus expenses)
IRS requires reasonable salary. Amounts above $176,100 are taxed at 2.9% (Medicare only)
Not subject to self-employment tax
How it works
As an S-Corporation, you split your income between salary (subject to payroll tax) and distributions (not subject to self-employment tax). Self-employment tax is 15.3% up to $176,100 (Social Security + Medicare), then 2.9% above that (Medicare only). This calculator shows your potential savings compared to sole proprietorship taxation.
What is "Reasonable Salary"?
The IRS requires S-Corp owners to pay themselves a "reasonable salary" for services performed. This typically means compensation comparable to what similar businesses would pay for the same work. Common guidelines suggest 40-60% of net income as salary, but this varies by industry and role. Consult a tax professional for personalized guidance.
You Could Save
$12,336
per year in self-employment taxes
Tiered Tax Rates Applied
Your income exceeds $176,100. The first $176,100 is taxed at 15.3% (Social Security + Medicare), and amounts above that are taxed at 2.9% (Medicare only).
Sole Proprietor
Current SituationCurrent: All income is subject to self-employment tax using tiered rates
S-Corporation
With S-Corp ElectionWith S-Corp: Only salary portion is subject to payroll tax; distributions avoid self-employment tax entirely
Note: This calculator shows self-employment tax savings only. Actual savings may vary based on QBI deduction impact, state taxes, etc. Consult a tax professional for personalized advice.