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S-CORP Tax Calculator
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Are you self-employed?
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All About The S Corp Tax Calculator
S Corp business owners may be interested in using an S Corp tax calculator to find what they owe. It is a simple tool that can help accurately calculate tax liability along with accounting for business deductions.
Table of contents
Key Takeaways:
- S Corp taxation depends on the owner’s personal income tax rate.
- S Corp owners can use business deductions to lower their taxes.
- All you need to use an S Corp tax calculator is your salary, deductions and distributions.
S Corp tax rate
When you have an S Corporation, the company itself doesn't pay federal income taxes. Instead, the profits or losses "pass through" to the shareholders, who report them on their personal tax returns. This means you avoid the double taxation that C Corporations face.
There is no specific S Corp tax rate as the income you earn from an S Corp is generally taxed at your personal income tax rate. For most people, this is useful because individual tax rates can be lower than corporate tax rates.
Plus, S Corp shareholders can take a portion of their income as distributions and maximize their savings. To get a better idea of your specific situation, you might want to use an S Corp tax rate calculator. This tool can help you understand how much you'll owe in taxes and how different salary and distribution scenarios impact your overall tax bill.
However, it's essential to pay yourself a reasonable salary. The IRS keeps a close eye to ensure you're not taking too much as distributions to dodge taxes.
S Corp taxation
As an owner of an S Corp, you get something called limited liability protection. This means you’re not personally on the hook for any debts or liabilities of the business since it's treated as separate from you.
So, if your company gets sued, your personal assets are protected. S Corps are pass-through entities, meaning your business doesn’t pay taxes on its profits—you do, as the owner. This is where the S Corp tax rate comes into play.
The income passes through to your personal tax return, so you only pay taxes once at your individual tax rate. This is different from C Corporations, where both the business and the owners pay income taxes.
To compare, you might use a sole prop tax calculator to see how taxes would work if you were a sole proprietor. This can help you understand the tax benefits of S Corps compared to other business structures.
S Corp tax estimator in action
Imagine you're an event planner operating as an S Corp. Your business earns $150,000 in profits for the year. You decide to pay yourself a reasonable salary of $60,000, which is subject to payroll taxes. The remaining $90,000 will be taken as distributions, which are not subject to SE taxes.
Here’s how you can use an S Corp tax calculator to understand your tax obligations:
- Enter business profit: Input the total business profit of $150,000.
- Input salary: Enter your salary of $60,000. The calculator will show the payroll taxes owed on this amount, which includes Social Security and Medicare taxes.
- Distributions: Enter the remaining $90,000 as distributions. Since distributions are not subject to self-employment taxes, the calculator will only consider these for federal and state income taxes.
- Calculate tax savings: Enter your business deductions. The calculator will then show your total tax liability, combining the income and payroll taxes.
S Corp vs LLC tax calculator
Let's look at the difference between S Corp vs LLC tax calculator in terms of tax savings. Imagine you're a consultant who has a net income of $120,000.
If you're taxed as an LLC (sole proprietor):
Self-employment tax: 15.3% of $120,000 = $18,360
Income tax (assumed at a 24% effective rate): 24% of $120,000 = $28,800
Total tax as an LLC: $18,360 (Self-Employment) + $28,800 (Income Tax) = $47,160
If you're taxed as an S Corp:
Salary taxes (on $60,000 salary):
Payroll tax: approx. 7.65% = $4,590
Income tax (22% rate): 22% of $60,000 = $13,200
Distribution taxes (on $60,000 distribution): Income tax (22% rate): 22% of $60,000 = $13,200
Total S Corp tax estimator: $4,590 (Payroll tax) + $13,200 (Income tax on salary) + $13,200 (Income tax on distribution) = $30,990
Comparison:
Total taxes paid as LLC: $47,160
Total taxes paid as an S Corp: $30,990
In this example, by choosing an S Corp, you could potentially save $16,170 in taxes.
Sole prop tax calculator
Let’s talk about the sole prop tax calculator. If you’re a sole proprietor, figuring out your taxes can feel overwhelming. That’s where a sole prop tax calculator comes in handy. It’s a tool designed to help you estimate how much you’ll owe in taxes based on your business income.
Here’s how it works. You enter your total business income for the year, along with any business expenses you can deduct. The calculator then considers self-employment taxes, which are 15.3% of your net income. This covers your Social Security and Medicare contributions since, as a sole proprietor, you’re responsible for both the employer and employee portions.
Next, the calculator factors in your federal income tax. You’ll input your filing status and other personal details, which helps determine your effective tax rate. The tool then combines your self-employment tax and income tax to give you a total estimate of what you owe.
Sole prop vs S Corp tax calculator
When deciding between a sole prop tax calculator and an S Corp tax calculator, it's useful to understand how each one fits into your financial picture. A sole prop tax calculator is designed for those who run their business as a sole proprietor.
It calculates your taxes based on your total business income, accounting for self-employment taxes—15.3% for Social Security and Medicare—and your personal income tax rate. It’s straightforward but includes all taxes under one calculation, which means you might end up paying more in self-employment taxes.
On the other hand, an S Corp tax calculator is used if you’ve opted to structure your business as an S Corporation. It separates your salary from your distributions. You’ll pay payroll taxes (like Social Security and Medicare) only on your salary, not on the distributions you take from the company’s profits. This can potentially reduce your self-employment tax burden, as distributions are not subject to self-employment taxes.
FlyFin provides unlimited tax support for business owners looking for an S Corp tax estimator to calculate business taxes. Expert CPAs prepare and file your returns, an income tracker tracks what you earn and AI finds all your deductions, saving you the most possible.
What’s FlyFin?
FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors.
But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. to find every possible tax deduction.
Then, our CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes.
Download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and more money on your taxes than last year, guaranteed.
Expert tax CPAs ensure 100%-accurate tax filing
A.I. finds every tax deduction, eliminating 95% of your work
On average users save $3,700
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