2026 tax year · Virginia
Is an S-corp election worth it in Virginia?
On $100,000 of profit the election saves about $5,074 a year in Virginia, after everything Virginia charges the company.
Work it out on your own numbers
The figures below use $100,000 of profit and our standard assumptions. Put your own in instead, this compares staying a sole proprietor against electing, with Virginia's own charges on the company included:
Salary share and withdrawal share are percentages. The withdrawal figure only affects the C corporation, it is what decides whether the second layer of tax applies at all.
Enter your figures above and press Compare.
What the election is worth on $100,000 of profit
A single filer taking the standard deduction, paying themselves 40% of profit as salary, with $1,500 a year of payroll and filing cost:
| Tax as a sole proprietor | $27,451 |
| Tax as an S-corp, federal and personal state | $22,377 |
| Saving from the payroll-tax split alone | $5,074 |
| What Virginia charges the company | − $0 |
| Net saving | $5,074 |
- Withholding for out-of-state shareholders. Virginia makes the company withhold or pay on behalf of shareholders who live elsewhere. It is a real obligation of the company, not of you personally, and it depends on who owns it.
The profit range where it actually pays in Virginia
From about $20,000 of profit upwards. Below that, the $1,500 of payroll cost is more than the saving.
| Net profit | Sole proprietor | S-corp, all in | Difference |
|---|---|---|---|
| $60,000 | $14,986 | $11,928 | saves $3,058 |
| $100,000 | $27,451 | $22,377 | saves $5,074 |
| $150,000 | $45,366 | $37,650 | saves $7,716 |
| $250,000 | $79,082 | $72,111 | saves $6,970 |
What Virginia does differently
Virginia taxes the profit either way. Whether you take it as self-employment income or as salary plus distribution, roughly $5,493 of Virginia income tax sits on $100,000 of profit, the election moves the payroll-tax half of the bill, not the state half.
Virginia is one of 31 states with a pass-through entity tax. Entity pays state tax on behalf of owners. Owners get state tax credit on their personal return. The entity-level payment is deductible as a business expense, bypassing the $40,400 SALT cap. That is a genuine reason to elect beyond the payroll-tax saving, and it is not in the figures on this page, the calculation below is federal payroll tax against Virginia income tax as an individual.
The Virginia detail
Virginia automatically follows the federal election, the S corp files informational Form 502 and pays no entity-level income tax, though it withholds on nonresident shareholders. Virginia's optional PTET (Form 502PTET, 5.75%) sunsets after taxable year 2025 under current law, so do not assume it is available for 2026. The $100 registration fee is the minimum for up to 5,000 authorized shares.
We rate our confidence in this entry as medium: some of it comes from tax publishers and professional bodies rather than from Virginia's own revenue department. Confirm it before acting on it.
How much salary to pay yourself
Enter your figures above and press Calculate.
Less salary means less payroll tax, so the arithmetic always points at the smallest salary you can justify. That is exactly why it is not a number to optimize: compensation has to be reasonable for the work you do, and the penalty for getting it wrong is reclassification plus back payroll tax. The cheapest row here is the riskiest one.
| Salary share | Salary | Distribution | Total tax | vs sole proprietor |
|---|---|---|---|---|
| 20% | $20,000 | $76,970 | $18,862 | $8,589 |
| 30% | $30,000 | $66,205 | $20,619 | $6,831 |
| 40% | $40,000 | $55,440 | $22,377 | $5,074 |
| 50% | $50,000 | $44,675 | $24,135 | $3,316 |
| 60% | $60,000 | $33,910 | $25,893 | $1,558 |
What this assumes
- Single filer, standard deduction, the business as the only income.
- 40% of profit taken as salary in the headline figures.
- $1,500 a year for payroll and a separate 1120-S, a cost estimate, not a tax figure, and it varies by provider.
- Comparing against a sole proprietorship. If you already trade through an LLC, some state fees are owed either way and are not a cost of electing.
- Anything listed as not modeled above is genuinely owed, it is excluded because it does not depend on profit, not because it is nil.
What these words mean
- Nonresident
- Someone who earns money in a place without living there. Most states and cities tax non-residents only on what they earned inside the boundary, and residents on everything.
- Pass-through
- A business that pays no tax itself, its profit passes through to the owners, who pay tax on it on their personal returns. S corporations, partnerships and most LLCs work this way.
- Entity level
- A tax charged to the company itself, before any profit reaches the owners, as opposed to a tax the owners pay on their own returns.
- S corporation election
- Asking the tax office to treat your company as a pass-through, so profit is taxed to you rather than to the company. The owner takes a salary and the rest as a distribution, which is what saves payroll tax.
- Distribution
- Profit paid out to a company’s owner that is not salary. It is not subject to payroll or self-employment tax, which is the whole point of the S corporation election. And why the salary has to be defensible.