S Corporation Tax Calculator
Estimate tax savings, optimize owner compensation, and compare business entity structures
Business Information
Owner Compensation
As a sole proprietor or LLC, all business income passes through to your personal tax return and is subject to self-employment tax.
Tax Information
Tax Analysis Results
S Corporation Tax Analysis
S Corporation Tax Breakdown
| Category | Amount | Description |
|---|---|---|
| Business Net Income | $120,000 | Total business income minus expenses |
| Owner's Salary | $80,000 | Reasonable compensation to owner |
| Owner's Distributions | $40,000 | Profit distributions not subject to payroll tax |
| Federal Income Tax | $19,200 | Federal income tax on salary and distributions |
| State Income Tax | $6,000 | State income tax on salary and distributions |
| Employee FICA Tax | $6,120 | Employee portion of FICA taxes on salary |
| Employer FICA Tax | $6,120 | Employer portion of FICA taxes on salary |
| S Corp Annual Fees | $800 | Annual state filing fees for S Corporation |
| Additional S Corp Expenses | $2,000 | Accounting, payroll, and administrative costs |
| Total Tax and Expenses | $40,240 | Total tax burden and S Corp expenses |
S Corporation Tax Savings
Key Benefits: S Corporation status can save self-employment taxes on profits distributed as dividends, but requires reasonable salary to owners and additional compliance costs.
S Corporation Compensation Optimization
Recommendations for Your Business
Sole Proprietorship Tax Analysis
Sole Proprietorship Tax Breakdown
| Category | Amount | Description |
|---|---|---|
| Business Net Income | $120,000 | Total business income minus expenses |
| Federal Income Tax | $19,200 | Federal income tax on business income |
| State Income Tax | $6,000 | State income tax on business income |
| Self-Employment Tax | $16,973 | Self-employment tax (15.3% with deduction) |
| SE Tax Deduction | -$1,483 | Deduction for one-half of self-employment tax |
| Total Tax Burden | $40,690 | Total tax burden for sole proprietorship |
LLC Tax Analysis
LLC Tax Breakdown
| Category | Amount | Description |
|---|---|---|
| Business Net Income | $120,000 | Total business income minus expenses |
| Federal Income Tax | $19,200 | Federal income tax on business income |
| State Income Tax | $6,000 | State income tax on business income |
| Self-Employment Tax | $11,854 | Self-employment tax (partially reduced) |
| SE Tax Deduction | -$1,034 | Deduction for one-half of self-employment tax |
| LLC Annual Fee | $550 | Annual state filing fees for LLC |
| Total Tax Burden | $36,570 | Total tax burden for LLC |
Entity Type Comparison
Entity Comparison Summary
| Category | S Corporation | Sole Proprietorship | LLC |
|---|---|---|---|
| Total Tax Burden | $32,450 | $40,690 | $36,570 |
| Annual Savings | Best Option | -$8,240 | -$4,120 |
| Take-Home Income | $87,550 | $79,310 | $83,430 |
| Effective Tax Rate | 27.1% | 33.9% | 30.5% |
| 5-Year Tax Burden | $162,250 | $203,450 | $182,850 |
Other Considerations Beyond Tax Savings
- Compliance Requirements: S Corps have higher compliance requirements including payroll, board meetings, and separate tax returns.
- Audit Risk: S Corps with unusually low salaries relative to distributions may face higher IRS scrutiny.
- Fringe Benefits: Different treatment of health insurance and fringe benefits between entity types.
- Future Growth: Consider your long-term business plans when selecting an entity structure.
Scenario Comparison
No saved scenarios yet. Calculate and save a scenario to begin comparing.
Detailed Scenario Comparison
| Scenario | Business Income | Owner's Salary | Distributions | Total Tax | Take-Home | Tax Rate |
|---|
This calculator provides estimates only and is not a substitute for professional tax advice. Tax rates and regulations are subject to change. Please consult with a qualified tax professional for advice specific to your situation.
Corporation Tax Calculator Assistance Help
How to Use This Calculator
According to this calculator you are able to assess tax differences among types of business entities, as well as optimize your S Corporation compensation structure:
- Write down your business income and expenditures
- Choose S Corp, Sole Proprietorship, or an LLC
- In S Corps, determine your salary and distributions levels
- Fill in your tax rates, as well as other information
- The calculator will show you your results when you click "Calculate Tax Savings"
Information on do's and Don'ts About S Corporations
Key advantages: S Corporations can save self-employment taxes because business owners receive a part of income as distributions (not liability to FICA/Medicare taxes).
Reasonable Salary Requirement: IRS dictates that S Corp owners must take a "reasonable salary" that depends on the industry standards, qualifications, and size of any particular business.
Comparing Entity Types
Sole Proprietorship: The simplest type of business but the income is always treated as self-employment and is taxed at 15.3 percent.
LLC (Single Member): LLC that reports pass-through taxes but has limited liability just like the sole proprietorship.
S Corporation: Salary/distribution split offers tax advantage although the compliance requirements and expense are greater.
Calculator Features
- Tax comparison: Business forms compared
- Salary Optimization: Set the optimal distribution/salary ratio
- Save business scenarios: Save different business conditions to compare
- Visualizations: Graph and charts to learn your accounting status