Minnesota S-Corp Election Savings Calculator
Minnesota has a graduated state income tax with a top rate of 9.85%. 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 Minnesota for 2026.
Sole prop / default LLC
Take-home rate 71%
Take-home $85,533 Tax $34,467
Net profit $120,000
Self-employment tax (15.3%) $16,955
Federal income tax $11,506
Minnesota income tax $6,006
Take-home pay $85,533
S-corp election
Take-home rate 74%
Take-home $88,629 Tax $31,371
Salary (W-2 wages) $65,000
Distribution (K-1) $48,828
Payroll tax (15.3%) $9,945
Federal income tax $14,064
Minnesota income tax $6,162
S-corp admin costs $1,200
Take-home pay $88,629
Electing S-corp status could save you
$3,096 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.