The S-Corp question,
answered with your numbers
S-Corporation election can reduce self-employment tax exposure for pass-through business owners. The savings come from distribution income escaping FICA, but only when reasonable compensation is set correctly. This calculator estimates the savings; the conversation determines whether the election fits your specific situation.
Your inputs
Your business income
Estimated annual savings
FICA savings on S-Corp election
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Approximate annual FICA tax savings
Enter your numbers to see the calculation.
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Estimated distribution portion (escapes FICA)
S-Corp election has administrative overhead (payroll processing, reasonable-comp documentation, separate corporate tax filing). The savings above must exceed those overhead costs by a meaningful margin to justify the election.
The strategy MicroTax actually applies
Reasonable compensation is the entire ballgame
The savings estimate above is driven almost entirely by one variable: the W-2 wage you pay yourself as an S-Corp officer. Set it too high and the savings disappear. Set it too low and you create IRS audit exposure that can claw back years of savings plus penalties.
"Reasonable compensation" is not a number you pick; it's a defensible figure based on industry compensation data, your specific role within the business, time devoted, and geographic market. The IRS has been increasingly aggressive on this question, particularly for professional-services S-Corps where the owner is the primary revenue producer.
MicroTax engagements that involve S-Corp election include a documented reasonable-compensation analysis at signing, annual review against industry comp data, and audit-defense documentation maintained continuously. See the business owners advisory page for the broader context.
Assumptions in this calculation
- 2026 Social Security wage base ($168,600) and FICA rates (12.4% SS, 2.9% Medicare, +0.9% above $200K).
- SE-tax base is 92.35% of net business income (the standard adjustment).
- Reasonable compensation entered must reflect actual industry comp data for your role. The calculator does not validate this.
- Excludes state-level entity taxes (NY/CA franchise tax, gross receipts taxes, etc.) which may offset S-Corp savings.
- Excludes administrative costs of payroll processing, separate corporate filing, and reasonable-comp documentation.
- Assumes the business qualifies for S-Corp election (US-based, 100 or fewer shareholders, eligible entity type).
This is illustrative, not advice. The figures above are estimates based on simplified federal assumptions. They do not constitute tax advice, financial advice, or a guaranteed projection of outcomes. Personal tax situations involve state taxes, NIIT, AMT, phase-outs, specific deductions, and many other factors not modeled here. Before making any tax-driven financial decision, consult a qualified tax advisor.
A calculator estimates. An advisor delivers
The S-Corp election decision depends on more than the FICA math: state-level entity taxes, payroll processing cost, reasonable-comp defensibility, and your broader entity architecture all factor in. We assess this in 30-minute discovery calls.