Free Tool
Would an S-Corp
Actually Save You?
Compare self-employment tax as a sole proprietor against payroll tax under an S-corporation election. This one shows the California costs and the running costs too, which is why its number is smaller than most calculators will tell you.
Figures for tax year 2026, checked against IRS and California FTB sources on 2026-08-27.
What the number does not say
The salary is the whole calculation
A low salary makes the saving look large and is exactly what the IRS examines. Reasonable compensation means what someone else would charge to do your job, and it has to survive being questioned. Any calculator that picks the salary for you is selling something.
This is payroll tax, not income tax
The election changes how much Social Security and Medicare you pay. It does not change your income tax. Calculators that show a bigger number usually got there by mixing the two together.
There is a level below which it is not worth it
Once the payroll service, the extra return and the California franchise tax are counted, a modest profit can leave you no better off and with more admin. The honest answer for some businesses is to stay as you are.
It is not only about tax
An S-corporation brings real payroll deadlines, and missing a partnership or S-corporation return costs a penalty per owner per month even when no tax is due. Worth knowing before you take on the structure.
Entity choice depends on far more than payroll tax, including your state, your other income and your plans for the business. This is a general estimate, not tax advice, and using it does not make you a client. Your own position can differ. Ask us and we will work it out properly, at no cost.