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S corp vs sole prop tax

How much self-employment tax might an S corp salary split save versus Schedule C?

Your numbers

Payroll / SE tax saved with an S corp

$11,663

Sole-prop self-employment tax$25,433
S-corp employer + employee FICA$13,770
S-corp distributions (not SE-taxed here)$90,000

Tip. Educational estimate with the assumptions listed on this page. Not tax, legal, or investment advice.

Assumptions

  • 2026 Social Security wage base is $184,500.
  • Additional Medicare uses the $200,000 single threshold.
  • Income tax, QBI, reasonable-salary risk, and payroll service costs are excluded.

Explore the numbers

Examples

Load a scenario, then change one input at a time.

Example 1

Consultant

$180k profit, $90k salary.

Payroll / SE tax saved with an S corp

$11,663

Example 2

Thin savings

Salary close to profit.

Payroll / SE tax saved with an S corp

$125

Example 3

High profit

$300k profit, $150k salary.

Payroll / SE tax saved with an S corp

$8,656

What this calculates

Compare sole-proprietor SE tax with employer-plus-employee FICA on a reasonable S corp salary using 2026 Social Security wage-base math.

How to use it

  1. Use profit after ordinary expenses, before owner draws.
  2. Set salary to something you can defend with role, hours, and comps.
  3. If savings are smaller than payroll friction, stay on Schedule C.

Common mistakes

  • Setting salary near zero.
  • Forgetting employer FICA is a real check you write.
  • Ignoring QBI wage effects.

Formula

Sole-prop SE ≈ 15.3% of 92.35% of profit (SS capped). S corp FICA ≈ 15.3% of salary (SS capped). Savings = SE − FICA.

FAQ

Is this the full S corp analysis?

No. It isolates payroll tax. Income tax, QBI, state unemployment, and administration can erase a thin savings number.

What is reasonable salary?

What you would pay someone else to do the owner work. Document it.

Does this include the 20% QBI deduction?

No. Pair it with the QBI estimate.

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