How much can you save by starting an S-Corp?
If you have an LLC or a normal corporation, the IRS allows you to elect what they call "Subchapter S" taxation.
When you elect S-corp taxation, you agree to abide by a few rules: one class of stock, only individual owners, etc.
In exchange, you get to decide on a reasonable salary for owners, which lets you decide how much you want to pay for Medicare and Social Security.
Normally, you would pay the Self-Employment taxes (both employee and employer sides of Medicare and Social Security taxes) on all of your income, 15.4% up to $118,500 and 2.9% thereafter.
With an S-corp, however, you only pay Self-Employment taxes on your salary.
But how much is that?
Use the sliders below to calculate how much less you would pay by electing S-corp taxation. Net Income is how much your business makes after business-related expenses. Salary is the portion of your net income you'll pay yourself as a reasonable salary.
Self-Employment Taxes Due
Want to go further? Handle Your Business will teach you everything you need to know about S-corps, LLCs, taxes, and more, including how to figure out just what "reasonable salary" means.