Are You Overpaying Self-Employment Tax Every Year?
Self-employed business owners and single-member LLC owners pay self-employment tax on every dollar of net income. An S-Corp election changes the math. See exactly how much you could save and what those savings build in a tax-free retirement account.
Calculate My SavingsAs a sole proprietor or single-member LLC, you pay 15.3 percent in self-employment tax on the first $168,600 of net income, plus 2.9 percent on everything above it. You pay both the employee and employer halves.
With an S-Corp election, payroll tax applies only to your W-2 salary. Distributions above your salary are not subject to payroll tax. The spread between your total income and your salary is where the savings live.
Every dollar saved on self-employment tax can redirect into a 7702 account, a tax-free retirement account with a floor that protects against market losses and no government cap on how much you can fund.
Your Business Income
Enter your numbers below. Results update as you type.
7702 Account Projection
See what the annual tax savings build in a tax-free 7702 account over time.
Your Self-Employment Tax Comparison
Common Questions
How does an S-Corp reduce self-employment tax?
As a sole proprietor or single-member LLC, self-employment tax applies to all of your net business income. With an S-Corp, you pay yourself a reasonable W-2 salary and take the remaining profit as a distribution. Payroll tax only applies to the salary portion. Distributions are not subject to payroll tax, which is where the savings come from.
What does "reasonable salary" mean?
The IRS requires S-Corp owner-employees to pay themselves a salary that reflects what they would pay someone else to do the same work. Setting the salary too low to avoid payroll tax is a red flag the IRS actively audits. The salary input in this calculator is your estimate of a defensible reasonable salary for your role.
What does the S-Corp overhead cost include?
Switching to an S-Corp adds costs: payroll processing, an additional business tax return (Form 1120-S), state franchise or annual report fees, and in some cases a registered agent. This calculator uses $2,000 per year as a conservative annual overhead estimate. Your actual cost depends on your state and the providers you use.
How do the S-Corp savings redirect into a 7702 account?
The tax savings from the S-Corp election represent dollars that previously went to self-employment tax and now stay with you. Redirected into a 7702 account each year, those dollars grow with a floor protecting them from market losses and can be accessed tax-free in retirement, with no government cap on how much you can fund.
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Send yourself a copy of this comparison. A King Legacy Group advisor can walk you through whether the S-Corp election makes sense for your situation and how to redirect the savings into your LivingLEGACY™ plan.
Stop Overpaying. Start Building.
The S-Corp election is one piece of a complete business owner tax strategy. A King Legacy Group strategy review looks at your full picture, entity structure, retirement vehicles, and protection plan, so every dollar works as hard as possible. Schedule your complimentary review and see your LivingLEGACY™ Designed.
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Important. This calculator is for educational purposes only and does not constitute tax, legal, or financial advice. The S-Corp election has significant legal, tax, and operational implications that vary by state. Self-employment tax calculations are simplified estimates based on federal rates for 2024 and do not account for state taxes, deductions, credits, or all components of the alternative minimum tax. The “reasonable salary” determination is fact-specific and subject to IRS scrutiny. 7702 account projections are illustrative. Consult a qualified CPA, tax attorney, and financial advisor before making any entity or compensation structure decisions.