How S corp taxes work
An S corporation passes its profit through to its owners, so the company does not normally pay federal income tax. Owners who work in the business must be paid a reasonable salary through payroll. That salary carries Social Security and Medicare taxes, shared between the company (the employer half) and the owner (the employee half). Profit left after the salary is passed through as distributions. It is taxed as income, but it does not carry payroll tax.
What the calculator includes
- Payroll taxes: Social Security at 6.2% each for employer and employee up to the 2026 wage base of $184,500, Medicare at 1.45% each on all wages, and the 0.9% Additional Medicare Tax on wages above $200,000 (single) or $250,000 (married filing jointly).
- Business deduction: the employer half of payroll tax reduces the profit that passes through.
- Income tax: 2026 brackets and the standard deduction for your filing status.
- QBI deduction: 20% of pass-through profit, with the 2026 thresholds and phase-in for wage limits and service businesses.
Formulas
employer payroll tax = 6.2% × min(salary, 184,500) + 1.45% × salarypass-through profit = profit − salary − employer payroll taxtaxable income = salary + pass-through profit + other income − standard deduction − QBI deductiontotal federal tax = income tax + employer payroll tax + employee payroll tax
Step-by-step example
A single filer has $120,000 of profit before owner pay and pays a $60,000 salary.
| Step | Calculation | Result |
|---|---|---|
| 1. Employer payroll tax | 7.65% × 60,000 | $4,590 |
| 2. Pass-through profit | 120,000 − 60,000 − 4,590 | $55,410 |
| 3. Taxable income before QBI | 60,000 + 55,410 − 16,100 | $99,310 |
| 4. QBI deduction | 20% × 55,410 | $11,082 |
| 5. Taxable income | 99,310 − 11,082 | $88,228 |
| 6. Federal income tax | 2026 single brackets | $14,122 |
| 7. Payroll taxes | 2 × 4,590 | $9,180 |
| 8. Total federal tax | 14,122 + 9,180 | $23,302 |
Choosing a reasonable salary
The IRS expects an S corp to pay a shareholder-employee reasonable compensation for the services they perform before distributions are made. It looks at what you do for the business, so there is no single percentage that works for everyone. A very low salary combined with large distributions is a common reason for IRS questions, so base your figure on what you would pay someone else to do your job.
Common mistakes
- Entering profit after your own salary. Enter profit before owner pay.
- Treating distributions as tax free. They are taxed as income.
- Forgetting state taxes and S corp fees, which can change the real result.
How to use this calculator
- Enter your values. Estimate the federal tax an S corp owner pays on business profit, split into payroll taxes and income tax.
- Check units and assumptions. Make sure the inputs use the same scale and that any optional settings match your situation.
- Calculate and review. Compare the output with the formula below and note any limitations stated on the page.
Formula and calculation method
The result is an estimate based on the inputs and assumptions documented by this calculator. Federal tax outcomes depend on filing status, other income, deductions, payroll, wage bases, and eligibility rules; a simplified calculator cannot represent every household or business situation.
Worked example
For example, compare the estimated tax result with and without the proposed S corporation treatment while keeping assumptions consistent. Change one input at a time and review which taxes and expenses are included before relying on the difference.
Search and practical tips
People commonly search for a s corp tax calculator – estimate federal taxes, how to calculate the result step by step, which formula to use, and how to check the answer manually. Use the formula above as a transparent starting point, and consult the relevant institution, agency, or qualified professional when an official rule or personal circumstances affect the result.
Frequently asked questions
What is the tax rate for an S corp?
An S corp generally pays no federal income tax itself. Its profit passes through to the owner, who pays income tax at personal rates from 10% to 37%, plus payroll taxes on the salary the company pays the owner.
Are S corp distributions subject to payroll tax?
No. Distributions are not subject to Social Security or Medicare tax, but they are still taxable income on your personal return. That difference is why owners are required to take a reasonable salary first.
How much salary should I pay myself?
The IRS requires reasonable compensation for the services you provide before you take distributions. There is no fixed percentage, so use pay for a similar role and ask an accountant. The calculator shows a reminder when salary is under 40% of profit.
Does this calculator include state taxes?
No. It estimates federal tax only for tax year 2026. State income tax, state S corp fees and taxes, and unemployment taxes are not included.
Is the QBI deduction included?
Yes. It applies the 20% qualified business income deduction using the 2026 income thresholds and phase-in ranges, with an option for service businesses. The property-based alternative limit is not modelled.