S corporation tax estimate calculator

Where the saving comes from

As a sole proprietor or LLC owner, you pay self-employment tax of 15.3% on most of your profit, up to the $184,500 Social Security wage base for 2026, and 2.9% above it. Once the business elects S corporation status, you pay yourself a salary through payroll and that salary carries the same payroll taxes. What is left can be paid out as a distribution, which carries none.

The saving is real, and it is not free. You take on payroll, a separate Form 1120-S and Alabama Form 20S, and the bookkeeping that keeps them straight. The calculator nets those costs off, then adjusts for income tax, because a salary also shrinks the 20% qualified business income deduction.

The salary question

The IRS expects an owner who works in the business to be paid reasonable compensation for that work. There is no safe harbor percentage, and the 60/40 split you may have heard quoted is not in any IRS guidance. What counts is what you would pay someone else to do your job. We think a salary picked to make the numbers work, rather than to match the job, is the most common way this election goes wrong.

Common questions

At what profit does an S corporation make sense?

It depends on your salary and your costs, which is why the calculator shows a break-even figure for your own numbers rather than a rule of thumb.

Does Alabama recognize the election?

Yes. Alabama follows the federal election automatically, so there is no separate state election to make. Both an LLC and an S corporation can owe Alabama business privilege tax. If it works out to $100 or less, nothing is owed or filed.

Read LLC and S corporation: what each one does in Alabama, or talk to us about our work with business owners before you file Form 2553.

More free tools: the Solo 401(k) vs SEP-IRA calculator, the Alabama business privilege tax calculator, and all our calculators.

Important: This calculator gives a general estimate for planning only. It is not tax, legal or financial advice, and using it does not make you a client of Titus CPAs. Results rely on the numbers you enter and on simplified assumptions. Tax rules, rates and deadlines change, so the results may be incomplete or wrong for your situation. Figures last reviewed October 2026. Before you file, pay or make a decision, confirm the result with your tax professional. If you don't have one, you can contact us.