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If you want to see exactly how much you can save, it’s worth plugging your numbers into an S Corp Savings Calculator. This tool estimates:
- Your self-employment tax under sole prop/LLC status
- Your tax liability under S-Corp status (based on a reasonable salary)
- Your net savings after additional S-Corp costs (e.g., payroll, accounting)
Here’s how to use it:
- Enter your net business income (after expenses).
- Choose a reasonable salary based on your role and industry norms.
- Review your estimated savings — and whether they outweigh added costs.
Pro tip: If your business is earning $50,000 or more, the S-Corp savings usually far outweigh the additional complexity.
At Easy Books TX, we use real-time calculations to show you how an S Corp Savings Calculator works—and how much you could save this year.
💼 What’s a “Reasonable Salary”?
This is one of the most important pieces of the S-Corp puzzle—and the most misunderstood. You can’t just pay yourself $10K on $200K profit and call the rest a distribution. The IRS will notice.
Your salary should be based on:
- Industry standards
- The type of work you perform
- Your level of involvement
- Comparable job roles in your region
Think of it this way: If you hired someone to do your job, what would you pay them? That’s your benchmark.
Pro Tip: Document how you determined your salary. It’s your best defense in case of an audit. A good method to determine this is to navigate to Salary.com or GlassDoor.com and enter your job title and geographic location. From there, you can choose the median salary for your position (or a little lower). The screenshot below shows an example of a plumber in Houston, TX, taken from Salary.com. I might choose a reasonable salary of $40,000 in this case.
🧮 Real-Life S Corp Savings Calculator Example
Let’s look at another realistic scenario using the S Corp Savings Calculator logic.
Net Profit: $120,000
Reasonable Salary: $70,000
Distributions: $50,000
- Employment tax on salary: $70,000 x 15.3% = $10,710
- SE tax on full income (no S-Corp): $120,000 x 15.3% = $18,360
S-Corp Savings:
$18,360 – $10,710 = $7,650
Even after $2,000 in extra costs for payroll and tax prep, you’re still $5,650 ahead.
S-Corp Savings Calculator
Now that you’ve seen the possible savings in the real world example above, enter your small business information in the form below to calculate how much your business could be saving.
Our S Corp Savings Calculator uses the self-employment tax limit of $176,100 applicable to tax year 2025 and calculates savings specific to Texas. Some states have different guidelines so be aware that you might need to do additional research if you do not live in Texas.
🛠️ When Should You Make the S-Corp Election?
The IRS requires you to file Form 2553 to elect S-Corp status. The deadline is:
- By March 15 of the tax year for it to apply to that year
- OR within 75 days of forming a new business
Missed the deadline? You can request late election relief—and we can help with that too.
📊 Are There Downsides to Electing S-Corp Status?
While the tax savings can be substantial, S-Corp status isn’t for everyone. Here are a few considerations:
✅ Added Complexity
- You’ll need to run payroll—even if you’re the only employee.
- You’ll file Form 1120-S, a separate corporate tax return.
- You may need bookkeeping support to stay compliant.
✅ Increased Costs
- Payroll service fees (usually $30–$80/month)
- Additional accounting or tax prep fees
- Possible state-level S-Corp taxes or franchise taxes (e.g., in CA or TX)
If you’re making less than $40K/year, the costs may cancel out your savings. But once you pass that threshold, it usually becomes a net gain.
Pro-tip: There are several good payroll providers that make payroll a cinch, like QuickBooks, ADP, or Gusto to name a few of the most popular ones.
📈 Long-Term Benefits of S-Corp Status
Beyond immediate savings, electing S-Corp status can help:
- Improve your credibility (you’re an “officer” of a corporation)
- Build retirement wealth (through solo 401(k)s or SEP IRAs)
- Streamline financial planning for future growth, lending, or selling
It’s not just a tax move—it’s a business strategy.
🎯 Final Thoughts: S-Corp Status Saves You Thousands—Let’s Do the Math Together
If you’re running a profitable business and still taxed as a sole proprietor or LLC, you’re likely leaving thousands on the table.
With a little help from an S Corp Savings Calculator, you can get a clear view of your potential savings and make an informed decision about your business structure.
At Easy Books TX, we care about the success of our potential customers and clients so we created this post and the calculator to help you see how much you could be saving. Remember, having clean and accurate bookkeeping allows small businesses to capture every expense, and more importantly, maximize every tax deduction. Hire us to let our experienced bookkeepers clean up your books, so you can focus on growing your business and keeping more of your hard-earned money.
