S-Corp Savings Estimator

An S-Corp election lets an owner split business income into a salary (subject to payroll tax, roughly 15.3% combined for Social Security and Medicare) and a distribution, which isn't. On $150,000 of net income with a $90,000 reasonable salary, self-employment tax as a sole proprietor runs about $21,194 (15.3% applies to 92.35% of net earnings, not the full amount); as an S-Corp paying payroll tax only on the $90,000 salary, that drops to about $13,770 — a difference of roughly $7,424.

The IRS requires the salary to be "reasonable" for the work actually performed, not the lowest number that minimizes tax — that's the part a real projection needs to get right, not this estimate.