Freelancers: Will Becoming an S-Corp Reduce Your Tax Bill? — try the nifty calculator
The 'don't blame me' blurb: I am not a financial advisor, portfolio manager, or accountant. This is not tax or investment advice; it's information to get you going. Please consult your trusty professional and do your due diligence. Carry on!
Me in the blue on set, rabbiting on about the benefits of the S-Corp
TL;DR
In my world as a freelance director of photography, the ‘should I be an S-Corp’ discussion comes up a lot among the crew on set. Some freelancers’ accountants are pro, and some are ‘meh’.
I created the calculator below that will give you an idea of whether you should switch.
Sole prop/LLC: one tax return, no payroll — but you pay self-employment tax (15.3%) on basically everything you make (your net profit).
S-Corp: you split your income into salary and distribution. The salary gets taxed like normal. The distribution skips self-employment tax entirely. This could save you serious moolah.
I net around $240-290k per year from two businesses: my DP work and owning and running StudiowerksDC. Yes, you better believe I’m an S-Corp.
I work in the film and TV business; most of us are freelancers. In general, the different professions — DP, gaffer, sound recordist, grip, makeup artist make similar amounts of money. Yet some are sole traders, others are S-Corps. Worse, one accountant says one thing, and another gives conflicting advice.
One of my fellow DPs earns $230,000 to $280,000 per year, yet his accountant has him set up as a sole trader. That makes no sense to me.
I created the calculator so freelancers and the self-employed can see the math for themselves. With it, you can have an informed discussion with your accountant. Show them the calculator; play around with the numbers.
It won't be accurate to the dollar, but it will be close. Hit me up with any feedback, and I can tweak it.
But first: legal structure vs. federal tax designation.
Get a handle on what a business legal structure is and what a federal tax designation is.
State Legal Structure
- Sole Proprietorship
- LLC
- Corporation
IRS Tax Designation
- Sole Proprietor / Disregarded Entity
- Partnership
- S Corporation
- C Corporation
This one gets mixed up a lot for good reason, as some of the terms are interchangeable.
For example, an LLC is a legal business entity created under state law. An S corporation is a federal tax classification. An LLC can elect to be taxed as an S corporation, or you can be a single-person business that is an S-Corp.
Sole Proprietor/LLC vs the S-Corp
The table below lists the differences between being a sole proprietor vs an S-Corp.
| Element | Sole Proprietor/LLC | S-Corp |
|---|---|---|
| Tax Returns | One Tax Return. Your profit shows up right on your personal return (Schedule C). No separate business return. | Two Tax Returns. A personal tax return (still your regular 1040) plus a separate S-Corp return (Form 1120-S) for the business. |
| Payroll | No Payroll. You just take money out of the business account when you need it. No paycheck, no W-2, nothing. | W-2 Payroll. You become an employee of your own business, on a real payroll system, getting an actual paycheck. |
| Tax Treatment | Self-employment tax on almost everything — 15.3% (Social Security and Medicare) on basically your entire net profit. | Splits income into two buckets taxed differently: your salary (taxed like normal) and your distribution (skips self-employment tax). |
| Bottom Line | Simple — but the most expensive setup once your income climbs, since every dollar earned gets hit with that 15.3%. | Doesn't lower your tax rate. More required paperwork, in exchange for shielding part of your income from self-employment tax. |
So why S-Corp it?
The point, in a nutshell, is to avoid paying the 15.3% self-employment tax on your entire net earnings (Gross income minus business expenses).
Self-employment tax is basically the self-employed person's version of the Social Security and Medicare taxes that staffers normally see withheld from their paychecks.
Self-employment tax consists of:
12.4% Social Security tax, subject to the Social Security wage base ( taxed up to $184,500 in 2026, then nada)
2.9% Medicare tax, generally without an income ceiling
An additional 0.9% Medicare tax on earnings above $200,000 single, $250,000 married filing jointly.
Side note: Staffers pay 7.65% Social Security Tax; their employer pays the other 7.65%. We self-employed pay both sides; that’s the only difference. Self-employment tax isn’t as evil as some make it out to be.
The S-Corp: Pay less tax, but there is a little more pain and admin cost
As an S-Corp, the pain points are that you need a W-2 payroll, just like a company with employees. Your accountant, a bookkeeper, or a service like QuickBooks Payroll can do it for you for around $700/year.
Second, you need to file two tax returns. Personal and S-Corp.
The good news? If you use QuickBooks like me, with your invoices, bank account, and business credit card all tied into it, the work is already mostly done. Your accountant can enter your file remotely, or you can send them the QuickBooks profit and loss statement. I have a bookkeeper look over my QuickBooks file to make sure I have categorized everything correctly, then the P&L statement goes off to my accountant.
So when does it actually make sense to be an S-Corp?
Use the calculator below; it will do the math for you. Keep in mind it’s an approximate number, but it should be pretty close.
That said, many online calculators are plain wrong and will overestimate the S-Corp savings because they don’t account for how the Section 199A, 20% Qualified Business Income (QBI) deduction for pass-through income is affected. Some calculators actually state they don’t account for it.
Also, don’t mess around with the W-2 “reasonable salary.“ Making $200k and paying yourself $50k may bring the IRS knocking. Discuss with your accountant.
There is no hard-and-fast number on how much you should pay yourself; it will depend on your profession and how much net profit your S-Corp makes. Adjust it year by year; we all know how variable working for yourself can be.
Calc below; have at it and share this with your solo operator friends and colleagues.
FreelancerFinance
Sole Proprietor vs S-Corp Calculator
Whether electing S-corp status actually saves you money, after payroll service and the extra return. 2026 numbers.
What this calculator assumes
- 2026 brackets and the $16,100 / $32,200 / $24,150 standard deduction from IRS Rev. Proc. 2025-32, plus the $184,500 Social Security wage base announced by SSA.
- Self-employment tax is 15.3% on 92.35% of profit up to the wage base, then 2.9% Medicare with no ceiling. The extra 0.9% Medicare tax applies above $200,000, or $250,000 filing jointly.
- The income tax line is the part most S-corp calculators skip. It captures the 20% pass-through deduction under the 2026 rules: thresholds of $201,750 single and $403,500 joint, the widened $75,000 / $150,000 phase-in ranges, the 50%-of-W-2-wages limit, and the new $400 floor. The alternative limit of 25% of wages plus 2.5% of qualified property is not modeled, which slightly understates the sole-proprietor side for anyone with a lot of gear or property still depreciating. Your salary counts as W-2 wages, which can rescue a deduction a sole proprietor would lose entirely.
- You take the standard deduction, with no capital gains, credits, or dependents in the picture.
- State figures for California, Illinois, DC and Tennessee are calculated from your own numbers and verified against those states' own tax authorities. States marked "worth checking" are ones I would rather flag than guess at — confirm with your state's revenue department and type the amount in.
- State personal income tax is left out on purpose. It lands within a few hundred dollars of the same under both structures, so it barely moves the comparison. Entity-level state taxes are a different animal, which is what the state selector is for.
- Retirement contributions and self-employed health insurance are left out. Both move the answer, and both work differently under the two structures.
- Your salary is also what your Social Security benefit and your Solo 401(k) employer contribution are built on. Shrinking it shrinks both.
An estimate for education, not tax advice. Run your own numbers past a CPA before you make any decisions.
Sources. 2026 brackets and standard deduction: IRS Rev. Proc. 2025-32. Social Security wage base: SSA. Section 199A as amended by the One Big Beautiful Bill Act §70105 — phase-in ranges of $75,000 single and $150,000 joint, and the new §199A(i) minimum deduction of $400 where QBI is at least $1,000. Overall limitation of 20% of taxable income before the deduction, per the Form 8995 instructions. QBI reduced by the deductible half of self-employment tax, per Reg. §1.199A-3(b)(1)(vi). State figures: California FTB, Illinois DOR, DC OTR, Tennessee Dept. of Revenue.
For you, what’s the verdict? Comment below — to S-Corp, or not to S-Corp, that is the question!
The "should I be an S-Corp" question comes up constantly with freelancers and self-employed. So I built a calculator to settle it — here's the real tradeoff between paying 15.3% self-employment tax on everything you make versus running payroll and filing two tax returns.