Know the Number Before You Elect S-Corp
Gather your real numbers, estimate a defensible salary, run 2026 payroll tax math, and find your actual break-even point before you file anything.
Electing S-corp status can reduce self-employment tax, but only when the numbers actually support it. This walks through five steps: gather your baseline numbers, estimate a reasonable salary, calculate what payroll taxes will actually cost, estimate the real savings after added costs, and check the decision against a few hard questions before you commit.
1 Gather Baseline Numbers
2 Estimate Reasonable Salary
3 Calculate Payroll Taxes
4 Estimate Potential Tax Savings
5 Decision Checkpoint
Built for physicians earning $100,000 or more in net income, medical practice owners, and high-income healthcare professionals weighing an S-corp election.
Questions we get a lot
It depends entirely on the gap between your net practice profit and a reasonable salary for your role. The savings come from avoiding self-employment tax on distributions above that salary, minus the added cost of payroll processing, additional tax filings, and accounting support. There’s no fixed percentage — it has to be calculated against your actual numbers.
$184,500. Social Security tax applies to salary up to that amount; Medicare tax applies to the full salary with no cap, plus an additional 0.9% on wages above $200,000 (single) or $250,000 (married filing jointly).
Payroll processing fees, additional tax filings (Form 1120-S and payroll tax returns), and accounting support for the added complexity. These recurring costs need to be subtracted from the projected tax savings to find the actual break-even point, not just the gross savings estimate.
Physicians earning $100,000 or more in net income are the typical starting point, since that’s usually where the potential tax savings begin to outweigh the added payroll and compliance costs. The actual break-even point depends on your specific salary-to-profit ratio, not income alone.
The break-even point is worth calculating exactly, not roughly.
If you want us to run the actual numbers for your practice, we can build the estimate with you.
Disclaimer: This checklist is for informational purposes only and does not constitute legal, tax, or financial advice. While we make every effort to keep the content accurate and up to date, federal and state laws and regulations can change without notice. Decisions based on this information should be made in consultation with a licensed CPA or attorney familiar with your specific situation. Leichter Accounting Services is not liable for any errors or omissions, or for any actions taken based on the contents of this checklist.