Last updated: July 14, 2026
Alabama S-corp savings calculator
Enter your annual net self-employment income (after business expenses).
$
Self-employment tax as a sole prop / LLC$16,955
FICA on your S-corp salary (60% = $72,000)$11,016
Distributions (SE-tax-free)Not subject to FICA/SE tax$48,000
Federal SE-tax saved$5,939
Payroll + tax-prep admin−$1,800
AL minimum franchise / LLC fee−$0
Net AL S-corp savings / year$4,139
At $120,000 of net SE income, electing S-corp status pencils out in Alabama — it generally starts paying off around $38,000 of net SE income.
Estimate for planning — federal SE tax + Alabama S-corp/franchise cost only; confirm reasonable-compensation with a CPA before electing.
The rules
Alabama self-employment & S-corp rules
- State income tax: up to 5%. Self-employment tax itself (15.3%) is federal and identical in every state.
- Minimum franchise / LLC fee: $0/year for an LLC or S-corp in Alabama, regardless of income.
- PTET (SALT-cap workaround): Available — the pass-through entity tax election lets the business deduct state tax federally, bypassing the $10k SALT cap.
- No deduction for federal taxes paid. Standard deduction is small ($3,000-$8,500 depending on filing status).
Questions
Frequently asked questions
How much self-employment tax will I pay in Alabama?▾
Self-employment tax is federal — 15.3% (12.4% Social Security up to the $184,500 wage base + 2.9% Medicare) on 92.35% of your net self-employment income, the same in Alabama as everywhere. Alabama then taxes that same income at its state income-tax rate (up to 5%). The calculator above shows your SE tax at any income.
Is an S-corp worth it for a Alabama freelancer or LLC owner?▾
In Alabama, electing S-corp status generally starts saving money once net self-employment income is around $38,000. Below that, the payroll/admin cost outweighs the self-employment-tax savings.
Does Alabama have a PTET (SALT-cap workaround)?▾
Yes. Alabama offers a pass-through entity tax (PTET) election that lets the business pay state income tax and deduct it federally, bypassing the $10,000 SALT cap. If you elect S-corp, this often stacks on top of the SE-tax savings.
How is my "reasonable salary" set for an S-corp?▾
The IRS requires S-corp owner-employees to pay themselves a reasonable salary (subject to FICA) before taking distributions. This calculator assumes 60% salary / 40% distributions as an illustration — your actual reasonable compensation depends on your role and industry and should be set with a CPA.