S-Corp Tax Savings Calculator
Evaluate whether electing S-Corp status makes sense for your 1099 locum tenens or independent contractor income.
Business Details
Total annual contracting revenue
The salary you pay yourself from the S-Corp.
50% of net income
Annual cost for payroll service, extra tax return, state LLC fees.
Net Annual Benefit of S-Corp
You are better off remaining a Sole Proprietor. The admin costs and lost QBI outweigh the FICA tax savings.
Sole Proprietor (1099)
S-Corporation
Understanding the Breakdown:
- SE Tax Savings: $8,957
- Lost QBI Value: −$8,148 (You lose QBI on the salary portion)
- Admin Costs: -$2,500
Clinical Context & Calculation Details
How to Use This Calculator
1. Enter Your Income & Expenses: Input your expected 1099 gross revenue and business expenses to find your Net Income.
2. Set a Reasonable Salary: Enter the W-2 salary you plan to run through payroll. This must be justifiable to the IRS. A lower salary increases FICA tax savings but increases audit risk and reduces QBI.
3. QBI Phase-out: Medicine is a Specified Service Trade or Business (SSTB). In 2026 the deduction starts shrinking once taxable income passes $201,750 (single) or $403,500 (married filing jointly), and you lose it entirely above $276,750 (single) or $553,500 (married filing jointly). Uncheck the box if you are phased out.
4. Review the Verdict: The calculator subtracts your admin costs and any lost QBI value from your FICA tax savings to show you the true net benefit.
Why Doctors Need This
For independent contractors and locum tenens physicians, self-employment taxes (15.3% up to the Social Security wage base, then 2.9% Medicare above it) take a massive bite out of income. Electing S-Corp status is often the single largest tax-saving maneuver available to 1099 earners.
However, it is not always a slam dunk. S-Corps require running payroll, filing a separate corporate tax return (Form 1120-S), and paying state franchise fees. For lower 1099 incomes (e.g., $50,000 from a side gig), these administrative costs and the reduction in QBI can actually make an S-Corp more expensive than remaining a Sole Proprietor.
The Math Behind It
Sole Proprietor FICA: 12.4% Social Security on 92.35% of net income up to the Social Security wage base ($184,500 in 2026), plus 2.9% Medicare on all of it, so 15.3% combined below the wage base.
S-Corp FICA: 15.3% applied only to the W-2 reasonable salary.
The Trade-off Equation: Net Benefit = (FICA Tax Saved) - (S-Corp Admin Costs) - (Value of Lost QBI).
Pearls & Pitfalls
- Pearl: If your total household income completely phases you out of the QBI deduction, the S-Corp becomes even more advantageous because you no longer have to worry about the "Lost QBI" penalty.
- Pitfall: Setting your reasonable salary too low. If a physician netting $400k sets their salary at $50k, the IRS will likely audit and reclassify distributions as wages, hitting you with back taxes and penalties.
- Pearl: Keep in mind that a lower W-2 salary also means a lower ceiling for solo 401(k) employer profit-sharing contributions (which are capped at 25% of W-2 salary). You must balance FICA tax savings with retirement account optimization.
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About the Author
Joshua Dunigan, DO | Family Medicine Resident & Founder
I'm a family medicine resident physician at Broadlawns Medical Center in Des Moines, Iowa (class of 2027). I founded MedMoneyGuide to give physicians specialty-specific financial guidance, with sources you can check.