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S Corporation vs Sole Proprietor Payroll Tax Calculator, 2026

Is this entity in good shape, or are there warning signs?

Self-employment tax on the whole profit against Social Security and Medicare tax on an S corporation salary, with the payroll tax difference.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Payroll tax saved with the S corporation
$10,484
Self-employment tax less S corporation payroll tax
Sole proprietor self-employment tax
$21,194
S corporation payroll tax (employer + employee)
$10,710
Drawn to one scale
Payroll tax saved with the S corporation$10,484
Sole proprietor self-employment tax$21,194
S corporation payroll tax (employer + employee)$10,710
Profit left as distribution after salary and employer tax$74,645
All results
MeasureResult
Payroll tax saved with the S corporation$10,484
Sole proprietor self-employment tax$21,194
S corporation payroll tax (employer + employee)$10,710
Profit left as distribution after salary and employer tax
Distributions carry no payroll tax; zero when salary and employer tax use up the profit
$74,645
How this was worked out
Work shownrecomputed as you type
Sole proprietor: SE earnings = 92.35% x profit; tax = 12.4% x min(SE earnings, wage base) + 2.9% x SE earnings + 0.9% x (SE earnings - threshold)
S corporation: tax = 12.4% x min(salary, wage base) + 2.9% x salary + 0.9% x (salary - threshold)
Wage base 2026 = $184,500
Saved = sole proprietor tax - S corporation tax

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Sole proprietor: SE earnings = 92.35% x profit; tax = 12.4% x min(SE earnings, wage base) + 2.9% x SE earnings + 0.9% x (SE earnings - threshold)
  • S corporation: tax = 12.4% x min(salary, wage base) + 2.9% x salary + 0.9% x (salary - threshold)
  • Wage base 2026 = $184,500
  • Saved = sole proprietor tax - S corporation tax

How it works

A sole proprietor pays 12.4 percent Social Security tax on net earnings up to the wage base plus 2.9 percent Medicare tax, on 92.35 percent of profit. An S corporation pays the same 15.3 percent combined, split between employer and employee, but only on the salary paid to the owner. Profit taken as distributions is not subject to payroll tax.

The saving is real only if the salary is reasonable for the work. This tool compares payroll tax and leaves out income tax, the QBI deduction (which a lower wage can change), state taxes, FUTA and state unemployment tax, payroll service costs and the loss of the self-employment deduction for half the tax. The 92.35 percent factor is one minus half of the combined 15.3 percent rate, which follows from the deduction for half the rate in section 1402(a)(12). Net earnings under $400 are not subject to self-employment tax under section 1402(b)(2).

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

What is the 2026 Social Security wage base?

The IRS gives $184,500 for 2026 earnings.

How is Additional Medicare tax handled?

It is 0.9 percent of wages or self-employment earnings above the threshold, paid by the individual with no employer match. The tool applies it to the owner on both sides of the comparison.

Can I set salary very low?

No. The salary must be reasonable compensation. See the reasonable salary calculator for a range.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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