S-Corp Tax Comparison Calculator

An S-Corp comparison separates supportable W-2 compensation from qualifying distributive-share payments. Wages are subject to the applicable employee and employer payroll-tax rules, while qualifying distributions are not wages; amounts can be recharacterized when the compensation facts do not support the reported treatment. Those mechanics produce modeled components, not an automatic reduction or net-benefit result.

For an ordinary nonfarm sole proprietor, Schedule C profit generally enters Schedule SE at 92.35%. If line 4c is $400 or more, Social Security tax applies up to the remaining wage base and Medicare tax generally applies without that cap. An S-Corp owner pays FICA on reasonable compensation, while qualifying distributions are not subject to FICA. This calculator compares those federal amounts and shows its listed entity-compliance costs separately; it does not recompute income tax, QBI, BAIT, FUTA, or NJ employer payroll assessments.

The Break-Even Point

There is no universal break-even income. The screening result reflects the user's entered salary assumption, other wages, filing status, and the listed compliance assumptions. QBI, income tax, BAIT, FUTA, NJ employer payroll assessments, and other omitted items can change the full-return result materially.

The Reasonable Salary Requirement

The IRS requires S-Corp owner-employees to pay themselves a reasonable W-2 salary before taking distributions. There is no magic number, but the IRS looks at what you would pay someone else to do the same work, industry benchmarks, time spent in the business, and profitability. Courts addressed this directly in David E. Watson, P.C. v. United States (668 F.3d 1008, 8th Cir. 2012).

The calculator uses the salary assumption exactly as entered; it does not infer an amount from profit or revenue. That assumption is not an industry standard, safe harbor, defensible range, or reasonable-compensation conclusion. Actual compensation should be supported separately with comparable wage evidence and the owner's facts.

NJ S-Corp Considerations

The statute applies to privilege periods beginning after December 22, 2022; for calendar-year taxpayers, that means January 1, 2023. NJ procedural FAQ/TB-105 also describe the rule as on or after December 22, 2022; unusual short periods beginning December 22 need Division confirmation. For a covered period, P.L. 2022, c.133 recognizes a valid federal S election unless the entity opts out. The separate CBT-2553 is historical for those periods. DORES 1120-filer registration, federal approval proof, Shareholder Jurisdictional Consent, and timely CBT-100S filing remain separate compliance steps and do not condition recognition. Formation date is not the test; earlier periods may require CBT-2553-R retroactive-relief review. Form CBT-100S uses the greater of the tiered minimum or the 6.5%, 7.5%, or 9% income-based CBT on Form 1120-S income subject to federal corporate income tax, such as certain built-in gains or net passive income. This calculator models only the tiered minimum based on gross receipts. The NJ BAIT election is available to S-Corps and can change federal tax through an entity-level deduction for NJ income tax. The individual SALT cap is $40,000 for 2025 and $40,400 for 2026 under OBBBA, increased from $10,000. This calculator does not model the BAIT payment, member credit, federal deduction, or QBI interaction.