California S-Corp Election Savings Calculator

California has a graduated state income tax with a top rate of 13.30%. Set your expected net profit and a reasonable salary to see whether an S-corp election beats staying a sole proprietor or default LLC in California for 2026.

Net profit before your salary

Your S-corp salary (W-2 wages)

Must be 'reasonable compensation' for your work — commonly 50-60% of profit as a rough guideline Extra annual S-corp costs

Payroll processing + a separate 1120-S return, on top of your usual bookkeeping Filing status State

Sole prop / default LLC

Take-home rate 72%

Take-home $86,225 Tax $33,775

Net profit $120,000

Self-employment tax (15.3%) $16,955

Federal income tax $11,506

California income tax $5,313

Take-home pay $86,225

S-corp election

Take-home rate 74%

Take-home $89,264 Tax $30,736

Salary (W-2 wages) $65,000

Distribution (K-1) $48,828

Payroll tax (15.3%) $9,945

Federal income tax $14,064

California income tax $5,527

S-corp admin costs $1,200

Take-home pay $89,264

Electing S-corp status could save you

$3,039 per year

The distribution portion of your profit skips the 15.3% self-employment tax entirely — it's only subject to ordinary income tax. That's the whole S-corp savings mechanism. It's offset by payroll tax on the salary you must pay yourself, plus payroll processing and extra tax-prep costs. The IRS requires "reasonable compensation" for your salary — pay yourself too little relative to your work and distributions, and it can be recharacterized as wages on audit.