Mr. BanksStaffAug 10, 2026
You're right at the edge where it starts to make sense.
Right now all $55,000 is subject to self-employment tax at 15.3%. With the election you split it: a reasonable salary (say $35,000) takes payroll tax, and the remaining $20,000 comes out as a distribution that doesn't.
That's roughly $3,000 saved. Against that you now have payroll filings, quarterly returns and probably $1,200 to $2,000 a year in additional accounting.
So you net maybe $1,000 to $1,800. Real, but not life-changing, and it only gets better as profit grows. At $90,000 it's clearly worth it. At $55,000 it's a judgement call about whether you want the admin.
The one thing to get right: "reasonable salary" is not a number you pick freely. Pay yourself too little and the IRS will reclassify it.
