2026 tax year

Is an S-corp election worth it?

The federal saving is the easy part. What your state charges the company decides it.

A sole proprietor pays self-employment tax on every dollar of profit. An S-corp owner pays payroll tax only on the salary they take, and the rest comes out as a distribution. That is the whole federal mechanism, and it is the same in every state.

What is not the same is the state layer. Four jurisdictions ignore the federal election entirely and tax the company as a C corporation. Eighteen charge a minimum owed even at a loss. Several tax turnover or net worth rather than profit. Any of those can outweigh the federal saving, and the general advice you will read, "elect once you clear $40,000 of profit"accounts for none of it.

Salary is a judgment, not an optimization Less salary means less payroll tax, so the arithmetic always points at the smallest salary you can get away with. Compensation has to be reasonable for the work you actually do; too low invites reclassification and back payroll tax. Every figure on this site uses 40% of profit as salary, and each state page shows the whole 20 to 60% range so you can see what the trade-off costs rather than being handed the riskiest number as an answer.

Is it worth it for you?

Net business profitOther W-2 wages (yours or a spouse's)

Filing statusState

Salary as a share of profitHow much of the profit you need to take outPayroll and filing cost a year

Salary share and withdrawal share are percentages. The withdrawal figure only affects the C corporation, it is what decides whether the second layer of tax applies at all.

Enter your figures above and press Compare.

States that ignore the federal election

Here the election creates a state tax rather than avoiding one:

State	What it charges the company instead
New Hampshire	7.5% on the company's income
Tennessee	6.5% on the company's income
Texas	a tax on turnover, not profit
Washington DC	8.25% on the company's income

States charging the company a rate on its income

State	Rate on the company's income
Washington DC	8.25%
New Hampshire	7.5%
Tennessee	6.5%
California	1.5%
Illinois	1.5%
Wisconsin	0.2%

States with a minimum owed at zero profit

These are owed whether the business made money or not, which is what turns a marginal election into a losing one for a small company:

What these figures do not include

Some state charges cannot be worked out from net profit. A gross receipts tax needs turnover; a net worth tax needs a balance sheet. Rather than leave them out silently and show a number that looks complete, each state page lists what applies there. 29 states have at least one:

Alabama net worth or capital tax
Colorado Withholding for out-of-state shareholders
Delaware gross receipts tax
Georgia net worth or capital tax, Withholding for out-of-state shareholders
Hawaii gross receipts tax
Idaho Withholding for out-of-state shareholders
Indiana Withholding for out-of-state shareholders
Iowa Withholding for out-of-state shareholders
Kentucky gross receipts tax
Maine Withholding for out-of-state shareholders
Maryland Withholding for out-of-state shareholders
Massachusetts net worth or capital tax, A threshold this calculator cannot check
Minnesota A threshold this calculator cannot check
Mississippi net worth or capital tax
Montana Withholding for out-of-state shareholders
Nevada gross receipts tax
New Hampshire A threshold this calculator cannot check
New Mexico gross receipts tax
North Dakota Withholding for out-of-state shareholders
Ohio gross receipts tax, A threshold this calculator cannot check
Oregon gross receipts tax
South Carolina net worth or capital tax
Tennessee net worth or capital tax
Texas gross receipts tax
Vermont Withholding for out-of-state shareholders
Virginia Withholding for out-of-state shareholders
Washington gross receipts tax
West Virginia Withholding for out-of-state shareholders
Wisconsin A threshold this calculator cannot check

Every state

What every figure on these pages assumes

Single filer, standard deduction, the business as the only income.
40% of profit taken as salary.
$1,500 a year for payroll and a separate 1120-S return. That is a cost estimate, not a tax figure, and it varies by provider, it is the number most comparisons leave out entirely.
Comparison is against a sole proprietorship. If you already trade through an LLC, some state fees are owed either way and are not a cost of electing.
Optional pass-through entity tax elections are excluded throughout. They are a separate SALT-cap question and are elective, not automatic.