S-Corp Tax Savings Calculator

Published: November 20, 2025 • Contractors & Employees
S-Corp Tax Savings Calculator 2025 | Comprehensive Analysis Tool
🎯 TAX YEAR 2025
S-Corp Tax Savings Calculator

Compare sole proprietorship vs. S-corporation election with comprehensive employment tax, QBI deduction, and cost analysis. Live preview updates as you adjust inputs.

📊 Your Inputs

Enter your business income and tax situation below. Results update instantly.

Your business profit before any owner salary or SE tax
Wages from other jobs subject to Social Security/Medicare
50%
Reasonable compensation typically 40-60% of profit; IRS considers industry norms, duties, qualifications
Payroll service, bookkeeping, tax prep, state fees

⚙️ Advanced Options (Click to Expand)

Your top federal bracket for income tax impact on QBI/deductions
Most trades/businesses qualify; phase-outs apply above certain income thresholds
Law, accounting, health, consulting, athletics, financial services, brokerage (limits QBI at higher incomes)
💡 Live Results

Estimated federal tax savings comparison

Estimated Net Annual Savings
$0
Calculating…
Item Sole Prop S-Corp Difference
Key Metrics
Gross Tax Savings
$0
Before admin costs
S-Corp Salary
$0
Reasonable compensation
K-1 Distribution
$0
After salary & FICA
📖 How This Calculator Works

Sole Proprietorship Scenario:

  • Self-employment tax calculated on 92.35% of net profit (15.3% rate = 12.4% Social Security + 2.9% Medicare)
  • Social Security capped at $176,100 wage base for 2025 (combined with other W-2 wages)
  • Additional Medicare tax (0.9%) on earnings above threshold ($250k MFJ, $200k others)
  • Half of SE tax deductible as adjustment to income (Schedule 1)
  • QBI deduction: 20% of qualified business income after SE deduction (subject to limitations)

S-Corporation Scenario:

  • Reasonable salary subject to employer + employee FICA (6.2% + 6.2% SS; 1.45% + 1.45% Medicare)
  • Social Security FICA capped at $176,100 wage base (combined with other W-2 wages)
  • Additional Medicare tax (0.9%) applies to wages only, not K-1 distributions
  • S-corp profit = business income – salary – employer FICA (passes through on K-1)
  • QBI deduction: 20% of S-corp profit (W-2 wages not QBI-eligible)
  • No SE tax on K-1 distributions (key savings driver)

Comparison & Net Savings:

  • Employment tax savings = (SE tax + Addl Medicare SP) – (Total FICA + Addl Medicare SC)
  • Income tax effects from QBI deduction differences and loss of half-SE deduction
  • Net savings = Gross savings – Annual S-corp admin costs
  • Guidance: Below ~$60k profit, S-corp rarely worthwhile after costs; above $60k, savings typically scale with income if salary set reasonably

Sources: IRS Publication 334 (Self-Employment), Topic 751 (FICA rates), Topic 560 (Additional Medicare), Form 8995 Instructions (QBI), 2025 Social Security wage base. This calculator provides estimates for educational purposes. Consult a tax professional for advice specific to your situation. Reasonable compensation is fact-specific; IRS considers duties, qualifications, time, industry norms, and other factors.