S-Corp Savings Calculator
An S-corp election lets you split locum profit into a reasonable W-2 salary plus distributions that escape self-employment tax. Estimate how much FICA you'd avoid — net of the added payroll and compliance cost — to see if it's worth it.
Net 1099 profit before owner compensation.
What you'd pay yourself as wages. Must be defensible to the IRS.
Payroll service, 1120-S prep, state fees. Default $2,500 is an estimate.
Federal FICA/SE tax only. Ignores state taxes, the QBI/§199A deduction (clinicians are an SSTB and phase out at higher incomes), retirement-plan interactions, and the very real IRS "reasonable compensation" risk — an artificially low salary can be recharacterized with penalties. A negative net figure means the S-corp likely is not worth it at this profit level.
How the savings work
As a sole proprietor, your entire net profit is hit with ~15.3% self-employment tax (subject to the Social Security wage-base cap). With an S-corp, only your W-2 salary carries FICA; the remaining profit is taken as a distribution that is not subject to FICA. That difference is the savings.
- Below the 2026 Social Security wage base ($184,500), the distribution avoids the full 12.4% + 2.9% (and 0.9% where applicable).
- Above the cap, Social Security was already maxed out, so the distribution only avoids the 2.9% Medicare (plus 0.9% Additional Medicare). The savings per dollar shrink considerably.
- Subtract the real-world cost of running payroll, filing Form 1120-S, and state fees (the editable default of $2,500/yr) to get rough net savings.
The catch the IRS cares about most: your salary must be reasonable compensation for the work. Set it too low and the IRS can recharacterize distributions as wages with penalties. Read the S-corp guide before electing.