2026 parameters: SS wage base $184,500 · SS rate 12.4% (employer + employee) · Medicare 2.9% (no cap) + 0.9% NIIT above $200K single / $250K MFJ · SE tax = 0.9235 × 15.3% (SS+Medicare) on net SE income, capped at SS wage base for SS portion.
Business Inputs
IRS requires "reasonable compensation." Typical: 40–60% for service businesses.
CPA/payroll fees above sole-prop baseline (~$1,500–$5,000 typical).
S-Corp can deduct 100% if added to W-2. Include annual amount or 0.
S-Corp vs. Sole Proprietor
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Annual Net Savings
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Break-Even Income
Minimum net income for S-Corp to win
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5-Year Savings
Cumulative, not discounted
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Reasonable W-2 Salary
| Tax Item | Sole Prop | S-Corp | Difference |
|---|
Break-Even Curve
Income Scenarios
| Net SE Income | Sole Prop SE Tax | S-Corp SE Tax | SE Savings | Net Savings (after admin) |
|---|
Export Results
Downstream: Solo 401(k) vs. SEP-IRA (AL-119) · Freelance Quarterly Tax (AL-123) · Tax-Advantaged Benefits (AL-01)