Federal income tax and QBI
The calculator does not estimate federal income tax or the qualified business income deduction. Owner wages can affect taxable business income and QBI, so payroll-tax savings should not be reviewed by themselves.
2026 TAX PLANNING TOOL
S-Corp vs. Sole Proprietor Savings Calculator
Estimate how an S-Corporation election could affect employment taxes and compare the potential difference with operating as a sole proprietor.
2026 federal rates
Includes other W-2 wages
Built for planning conversations
YOUR ESTIMATE
Start with the business numbers
Use annual amounts. Results update as you type.
$
Profit after ordinary business expenses, but before S-Corp owner wages and related payroll taxes.
$
This is a planning estimate—not a salary recommendation. It should be supported by the work performed.
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Wages earned by this owner outside the business. These can reduce the Social Security wage base remaining for the owner.
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Used for the married-filing-jointly Additional Medicare Tax threshold. A spouse’s wages do not reduce this owner’s Social Security wage base.
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Consider payroll service, tax preparation, bookkeeping, state filings, and other compliance costs.
Try an example:
ESTIMATED ANNUAL DIFFERENCE
$0
Sole proprietor$0
Estimated self-employment tax
S-Corporation$0
Estimated Social Security and Medicare taxes on owner wages
- Potential payroll tax difference
- $0
- Less: added annual S-Corp costs
- ($0)
- Estimated annual difference
- $0
Monthly equivalent
$0
Annual difference ÷ 12
Profit remaining after wage, employer FICA + added costs
$0
Before income tax and distributions
Break-even annual S-Corp costs
$0
Maximum costs before this estimate reaches $0
See compensation sensitivity
See how the result changes if supportable compensation is 10% lower or higher. This range does not determine reasonable compensation.
10% lower wage$0
Entered wage$0
10% higher wage$0
A planning estimate—not a filing decision
The entered wage, estimated employer FICA, and added S-Corp costs exceed business profit. Review the inputs before relying on this scenario.
This comparison estimates federal Social Security and Medicare taxes only. Review the Texas business owner checklist below before treating the result as a decision.
TEXAS BUSINESS OWNER CHECK
The calculator is one part of the decision.
Texas does not impose an individual state income tax, but an S-Corporation still changes federal income-tax planning, payroll responsibilities, state filings, owner benefits, and the cost of keeping the business compliant.
Texas franchise filings
A Texas entity may still have annual Comptroller filing requirements even when no franchise tax is due. For 2026, entities with annualized total revenue of $2.65 million or less generally do not file a No Tax Due Report, but still file a Public Information Report or Ownership Information Report.
Review 2026 Texas requirementsPayroll and unemployment filings
Owner payroll brings federal deposits and filings, W-2 reporting, and potentially FUTA and Texas unemployment registration, quarterly wage reports, and tax payments.
Texas unemployment-tax guidanceHealth insurance and retirement
More-than-2% shareholder health insurance has special reporting rules. W-2 compensation can also affect retirement-plan contributions and should be coordinated with the owner’s benefit strategy.
Read the IRS health-insurance guidanceThe real annual cost
Include payroll service, the separate Form 1120-S, bookkeeping, Texas filings, registered-agent or entity costs, and professional planning. Enter a realistic total in the calculator—not only the payroll fee.
Cash and recordkeeping discipline
The business needs enough cash for payroll and tax deposits. Wages, distributions, owner reimbursements, health insurance, and estimated taxes should be recorded separately and reviewed during the year.
Texas bottom line
A positive calculator result means the scenario may deserve a closer review. It does not mean an S-Corporation election automatically produces that amount of savings.
WHAT THIS TOOL COVERS
One comparison, with the important pieces visible
- 01Self-employment tax as a sole proprietor
- 02Payroll taxes on S-Corporation owner wages
- 03Potential payroll tax difference
- 04Additional S-Corporation costs
- 05Estimated annual difference
- 06How other W-2 wages may affect the estimate
THE BIGGER DECISION
Is an S-Corp Right for Your Business?
An S-Corporation election can reduce certain employment taxes in some situations, but tax savings are only one part of the decision. Business profit, reasonable compensation, payroll requirements, tax preparation costs, and your overall tax situation should all be considered.
Weidner CPA helps small business owners evaluate S-Corporation elections, reasonable compensation, payroll setup, bookkeeping, and year-round tax planning.
Schedule a Free ConsultationMETHODOLOGY
How the S-Corp Calculator Works
The estimate compares two federal employment-tax paths using 2026 rates.
Sole proprietor estimate
The calculator applies the IRS 92.35% net-earnings adjustment, then estimates 12.4% Social Security tax up to the 2026 wage base and 2.9% Medicare tax. It also considers Additional Medicare Tax when applicable.
S-Corporation estimate
The calculator estimates the employee and employer Social Security and Medicare tax connected with the shareholder-employee wage entered. S-Corporation distributions are not treated as wages in this simplified comparison.
Net annual difference
Estimated S-Corporation payroll taxes and the added annual costs you enter are subtracted from the sole proprietor self-employment tax estimate.
2026 assumptions: Social Security wage base of $184,500; 12.4% combined Social Security rate for self-employment; 6.2% each for employee and employer wages; 2.9% combined Medicare rate; and 0.9% Additional Medicare Tax above the applicable filing-status threshold.
SIDE-BY-SIDE
S-Corp vs. Sole Proprietor: What Changes?
| Area | Sole proprietor | S-Corporation |
|---|---|---|
| Owner pay | Owner draws; no W-2 salary | W-2 wages plus possible distributions |
| Employment taxes | Self-employment tax generally applies to net earnings | Employment taxes apply to shareholder-employee wages |
| Payroll | Usually no owner payroll | Payroll filings and deposits are generally required |
| Tax return | Business activity commonly reported on Schedule C | Separate Form 1120-S and owner Schedule K-1 |
| Administration | Usually simpler | More bookkeeping, payroll, and compliance work |
IRS REQUIREMENT
What Is Reasonable Compensation?
Reasonable compensation is the wage paid to a shareholder-employee for the services they provide. The IRS states that corporate officers who perform more than minor services and receive or are entitled to payments are generally employees.
The salary should be based on the facts—not selected only to maximize tax savings. Relevant considerations can include duties, time devoted to the business, training, experience, local pay for comparable work, and the company’s circumstances.
DECISION FACTORS
When Can an S-Corp Save Taxes?
Profit exceeds supportable wages
A meaningful gap between business profit and reasonable compensation may create room for distributions not subject to Social Security and Medicare taxes.
Savings exceed compliance costs
Payroll service, tax return preparation, bookkeeping, and state requirements can narrow the benefit. This is why the calculator subtracts your cost estimate.
The business can support the structure
Consistent books, separate business activity, timely payroll, and organized records make the election easier to operate correctly.
The full tax picture supports it
Income tax, the qualified business income deduction, retirement contributions, health insurance, and state rules can change the final answer.
PLAN FOR THE WHOLE COST
What Additional Costs Come With an S-Corp?
The election adds responsibilities that a simple tax-savings estimate can miss.
Payroll
Payroll processing, quarterly filings, W-2s, and tax deposits
Tax preparation
A separate federal S-Corporation return and owner reporting
Bookkeeping
Accurate wages, distributions, reimbursements, and equity activity
State compliance
Texas franchise tax reporting and any registrations that apply
Advisory
Reasonable compensation support and year-round tax planning
COMMON QUESTIONS
Frequently Asked Questions
Does an LLC automatically pay tax as an S-Corporation?
No. An LLC is a state-law entity. It must make a valid federal tax election to be treated as an S-Corporation. Eligibility and filing deadlines should be reviewed before making the election.
Is there a minimum profit level for an S-Corp?
There is no single IRS profit threshold. The practical decision depends on reasonable compensation, expected profit, added costs, other income, and the business owner’s broader tax situation.
Can I take all the profit as a distribution?
Not when an owner performs more than minor services and receives or is entitled to payment. The IRS may reclassify distributions or other payments as wages when appropriate compensation was not paid.
Why do other W-2 wages matter?
The owner’s other wages may use part or all of that owner’s annual Social Security wage base. A spouse’s wages do not reduce the owner’s Social Security wage base, but both spouses’ wages can affect Additional Medicare Tax when filing jointly. Employer Social Security tax can still apply to S-Corporation wages even when the shareholder has wages from another employer.
Does the calculator include income tax or the QBI deduction?
No. It focuses on federal Social Security and Medicare taxes. Income-tax deductions, QBI, retirement-plan contributions, health insurance, state taxes, and other planning items require a fuller analysis.
When should I make an S-Corp election?
Timing depends on the desired effective date, current entity classification, and filing history. Review the election early so there is time to address payroll, bookkeeping, and any late-election requirements.
WEIDNER CPA
Turn the estimate into a tax-planning decision.
CPA-led bookkeeping, tax preparation, and proactive tax planning for small businesses in San Antonio and throughout Texas.
Sources and important limitations
Calculation assumptions are based on IRS Topic No. 554, Self-Employment Tax, IRS Publication 15 (2026), IRS S-Corporation shareholder-employee guidance, and the Social Security Administration’s 2026 contribution and benefit base. Texas-specific considerations reference the Texas Comptroller’s 2026 franchise-tax filing guidance and the Texas Workforce Commission unemployment-tax program. Reviewed September 19, 2026.
This calculator provides a simplified educational estimate and is not tax, legal, payroll, or investment advice. It does not determine S-Corporation eligibility, reasonable compensation, or the amount that should be reported on a tax return. Actual results may differ. Consult a qualified professional about your facts.