SE Tax vs. S-Corp Calculator
By Forrest Baumhover, CFP®, EA · Last verified September 28, 2026
Find the income level where an S-corp election beats sole-proprietor self-employment tax.
The SE Tax vs. S-Corp Calculator compares self-employment tax against combined FICA under an S-corp election, for the same net income and an assumed salary, and reports the dollar differential and break-even income.
One mechanism drives every dollar of savings
A sole proprietor pays SE tax on 92.35% of net profit: 12.4% OASDI up to the Social Security wage base plus 2.9% Medicare, uncapped (IRC §1401, §1402). An S-corp shareholder-employee pays FICA only on the salary actually paid (IRC §3101, §3111) — anything distributed above that salary carries no FICA. Lowering the assumed salary shrinks the FICA base; it does not by itself create savings, since an unreasonably low salary invites recharacterization.
Worked example
A single filer nets $120,000 in self-employment income. As a sole proprietor, SE tax totals $16,955. Electing S-corp status with a $70,000 salary and $2,000 compliance cost brings combined FICA plus that cost to $12,710 — a $4,245 annual savings, with a break-even income of $89,953 at this salary and cost.
The IRC §164 one-half deduction excludes the 0.9% Additional Medicare Tax — only OASDI and Medicare deduct above the line. That tax's base also differs by structure: self-employment earnings above the threshold for a proprietor, salary above the threshold only for an S-corp — distributions never count toward it.
What this calculator does not decide
This tool takes the assumed salary as given; it does not test reasonableness. The IRS can recharacterize an unreasonably low salary as wages (Rev. Rul. 74-44), erasing the savings and adding penalties — benchmark the salary with the Reasonable Compensation Benchmarker first. It skips §199A (wages cut your QBI; run the QBI Calculator), state entity taxes, and the lower Social Security record a smaller salary builds.
Common Questions
Why does electing S-corp status save money if the tax rates are identical?
The rates match, but the base does not. SE tax applies to the entire net self-employment income; S-corp FICA applies only to the salary paid, so every dollar distributed above that salary escapes FICA on the S-corp side alone.
Does the lowest possible assumed salary maximize the savings this calculator shows?
It maximizes the number on screen, not the safe one. An unreasonably low salary risks IRS recharacterization, which can erase the savings and add penalties.
Does this calculator account for the extra cost of running payroll?
Only if you enter it. The compliance-cost field adds payroll processing, a registered agent, and accounting fees, and the break-even income rises accordingly.
More from the Desk
Read the Deep Dive behind this tool: Deep Dive: The S-Corp Salary Number That Invites an Audit