S corp tax savings calculator: the 2026 break-even profit
Give the salary as a share of profit and your yearly payroll and filing costs; the calculator finds the first profit at which the S election beats the default LLC.
Profit where the S corp starts to pay off
$29,000
Salary at 40% of profit, California
| Profit $60,000 | saves $2,211 |
| Profit $100,000 | saves $4,100 |
| Profit $150,000 | saves $6,300 |
| Profit $250,000 | saves $7,617 |
Computed by Radif Partners from IRS documents for tax year 2026 · How we calculate · no email asked, nothing sold
The S election saves money once the payroll tax it avoids on distributions is larger than everything it adds: the cost of running payroll, a second tax return, a smaller QBI deduction and any state tax on S corporations. For a single filer with no state income tax, a salary set at 40% of profit and $2,000 a year of payroll and filing costs, that break-even point is $25,000 of profit in 2026. Raise the salary to 60% of profit and it moves to $45,000; double the costs to $4,000 with the 60% salary and it climbs to $140,000. Above the break-even point the saving grows with profit: $4,571 a year at $100,000, $9,742 at $200,000 and $18,811 at $300,000, still with a 40% salary. Those are federal figures under the 2026 rules; a state that taxes S corporations or a salary the IRS would reject changes them.
Every S corp savings figure rests on one choice: the salary. Payroll tax applies to it, so each dollar moved from distributions to salary takes back part of the saving. The calculator above therefore asks for the salary as a share of profit rather than as a fixed amount, and then scans profits from $10,000 to $400,000 in steps of $1,000 until the S corp total falls below the total of the same business taxed as a default LLC. The quick tool below shows what one more $10,000 of salary costs at a given level.
Raise the salary, lose some of the saving
Saving at this salary ($150,000 profit)
$8,861
| With $10,000 more salary | $6,998 |
| Cost of the extra $10,000 | $1,863 |
What the election saves at six profit levels
The table holds the salary at 40% of profit and the yearly costs at $2,000, for a single filer living in a state without income tax. "Default LLC" means a sole proprietor or a single-member LLC filing Schedule C; "S corp" means the same business after the election, with payroll on the salary and the rest passed through on a K-1.
| Profit | Salary (40%) | Default LLC, total tax | S corp, total tax and costs | Yearly saving |
|---|---|---|---|---|
| $50,000 | $20,000 | $9,732 | $7,859 | $1,873 |
| $75,000 | $30,000 | $15,495 | $11,956 | $3,539 |
| $100,000 | $40,000 | $22,365 | $17,794 | $4,571 |
| $150,000 | $60,000 | $37,608 | $30,363 | $7,245 |
| $200,000 | $80,000 | $53,431 | $43,689 | $9,742 |
| $300,000 | $120,000 | $92,125 | $73,313 | $18,811 |
The saving does not rise in a straight line. Between $100,000 and $200,000 it roughly doubles, then it jumps again at $300,000. Two effects meet there. At high profit the default LLC owner pays the 0.9 % Additional Medicare Tax on self-employment earnings above $200,000, which the S corp owner avoids on distributions. And the QBI deduction of the default LLC starts to be limited by the wage rule above $201,750 of taxable income, a limit the S corp meets more easily because it pays W-2 wages.
Three inputs that move the break-even point
The salary share
A higher salary means fewer dollars escape payroll tax, so the business needs more profit before the election pays for its costs. The grid below shows how far the point moves. The IRS sets no percentage; the salary must match what the owner's work is worth, which the reasonable salary guide looks at in detail.
| Salary share | Costs $0 | Costs $2,000 | Costs $4,000 |
|---|---|---|---|
| 30 % | $10,000 or less | $21,000 | $41,000 |
| 40 % | $10,000 or less | $25,000 | $50,000 |
| 50 % | $10,000 or less | $31,000 | $66,000 |
| 60 % | $10,000 or less | $45,000 | $140,000 |
Fixed costs
With no costs at all, the election would save money at almost any profit, because the payroll side never costs more than the self-employment tax it replaces. Costs are what create a threshold. A payroll service, the extra time or fee for Form 1120-S and the state's unemployment insurance account all count. With a 40% salary, going from $2,000 to $4,000 a year pushes the break-even point from $25,000 to $50,000. Enter your real quotes rather than the placeholder, and count only what the election adds: an accounting subscription you would keep as a sole proprietor does not belong in the figure.
Filing status and state
Married couples filing jointly have wider brackets and a higher QBI threshold, so the income tax side of the comparison shifts. At a 60% salary and $4,000 of costs, the break-even point is $140,000 for a single filer and $89,000 for a joint return. The state changes more: where an S corporation pays its own franchise or minimum tax, or where the election is not recognized, the saving can shrink to nothing. Pick your state in the calculator and read its page for the rule that applies.
Why the saving is smaller than 15.3 % of the distributions
A quick estimate multiplies the distributions by 15.3 % and calls it the saving. It overstates the result for three reasons. Self-employment tax applies to 92.35% of profit, not all of it. Half of it is deductible, so removing it also removes a deduction and raises income tax a little. And the QBI deduction falls, because the salary is not qualified business income: at $100,000 of profit and a 40% salary it drops from $15,367 to $10,980. Above the $184,500 Social Security wage base only the Medicare part of the tax is left to avoid, which flattens the curve.
Payroll taxes on your own salary
Employer + employee FICA
$9,180
| FUTA (0.6% of $7,000) | $42 |
| Same as 15.3% of salary | $9,180 |
What the calculator cannot price
Some costs have no fixed number. Late payroll deposits carry penalties, and an S corp owner who stops paying attention to payroll for a quarter can lose a year of savings. Retirement plans change too: in an S corp the employer contribution is a share of W-2 salary, so a low salary can mean a smaller plan than a sole proprietor would get on the same profit. Health insurance for an owner with more than 2% of the shares must be run through the company to stay deductible. None of this is in the totals above. For the full line-by-line comparison at your own figures, use the LLC vs S corp calculator, and if the numbers point to yes, the Form 2553 guide has the deadline.
A practical reading: below the break-even profit, stay as you are. Just above it, the saving is a few hundred dollars and easily lost to one mistake. The election starts to look sound when the calculator shows a saving of several thousand dollars at a salary you would be comfortable defending, which is the point to involve a CPA or enrolled agent.