Investor Tools
S-Corp + Cost Segregation Tax Strategy Calculator
Two levers come up constantly with investors: an S-corp election that cuts self-employment tax, and a cost segregation study that accelerates depreciation on a commercial property. Run both on your own numbers, then take the result to your CPA.
I'm a commercial real estate broker, not a CPA, tax advisor, or attorney. This page is education, not tax or legal advice.
1. S-corporation election
Compares self-employment tax as a sole proprietor or single-member LLC with payroll tax on a reasonable salary.
Uses the 2026 Social Security wage base of $184,500. Ignores the 0.9% Additional Medicare Tax, QBI income limits, state taxes, and health-insurance and retirement effects.
2. Rental depreciation + cost segregation
Estimates year-one depreciation and what a paper loss is worth if it is allowed against your other income.
This is a deferral, not a permanent saving. Sale triggers recapture: up to 37% on the reclassified portion (about $111,000 here if fully recaptured) and up to 25% on building depreciation. A 1031 exchange or holding until death can defer or avoid it. Ignores the excess business loss limit and the passive-loss $25,000 allowance.
S-corp net savings plus rental tax saved, on the inputs above. Treat it as a conversation starter with your CPA, not a forecast. I'm not a CPA or an attorney, and nothing here is tax or legal advice.
What the calculator assumes and leaves out
- • Federal only. Florida has no state income tax, but other states do.
- • Commercial rental losses are generally passive. They offset other income only if you qualify as a real estate professional (750+ hours and more than half your working time in real property trades or businesses) or another exception applies. Otherwise the loss is suspended and carried forward.
- • Depreciation is a deferral. Sale triggers recapture, up to 37% on 5/7/15-year property and up to 25% on building depreciation, unless deferred through a 1031 exchange.
- • An S-corp owner must pay a reasonable salary. A low salary is an audit risk.
- • Not modeled: the 0.9% Additional Medicare Tax, QBI income limits, the excess business loss limit, AMT, state tax, mid-month convention, and cost-study fees. For a fuller cost seg model by asset type, use the Cost Segregation Calculator.
Disclaimer: MaxLife Commercial and Ryan Solberg are real estate professionals, not certified public accountants, tax advisors, or attorneys. This calculator provides estimates for educational purposes only and is not tax, legal, or accounting advice. No CPA-client or attorney-client relationship is created by using it. Tax law changes and depends on your facts. Consult a qualified CPA or tax attorney before acting.
What the Calculator Computes
Two separate federal estimates. The S-corp side compares payroll tax on a salary against self-employment tax on the full profit. The rental side compares year-one depreciation with and without a cost segregation study, then shows how much of the resulting loss you could use.
Sole prop SE tax = 12.4% (up to the wage base) + 2.9% on 92.35% of net profitS-corp payroll tax = the same rates applied to your salaryNet S-corp savings = payroll tax saved − extra income tax − yearly extra costsDepreciable basis = Price × (1 − Land %)Year-1 depreciation = bonus on reclassified part + building basis ÷ 39 (or 27.5) × months ÷ 12Tax saved = usable loss × marginal rate (usable only if the loss is non-passive)The calculator also deducts half of the SE tax and applies a 20% qualified business income deduction in its income-tax comparison, and it uses a rough 7-year straight-line proxy for any reclassified property not covered by bonus depreciation. Those are simplifications, so treat the output as a direction, not a return position.
Worked Example With the Default Inputs
Hypothetical numbers for illustration, not a quote or a forecast. The assumptions:
- →S-corp side: $200,000 net profit, $100,000 salary, $2,500 a year of extra costs, 24% marginal rate
- →Rental side: $2,000,000 purchase, 25% land, 20% of the remaining basis reclassified by a study, 100% bonus depreciation
- →Commercial building (39-year life), $120,000 net rent before depreciation, in service all 12 months of year one
The last two rows are the point of the exercise: the same depreciation is worth nothing this year or about $50,000 depending on whether the loss is passive for you, which is a question for your CPA. The calculator's output can differ by a dollar from rounding.
Inputs and What They Mean
Net business profit, salary, and extra costs
Profit is what the business earns before your own pay. Salary is the wages you would pay yourself as an S-corp owner. Extra costs are the yearly payroll-service and S-corp return fees. Salary is capped at profit inside the math.
Land share and reclassified percent
Land is not depreciable, so only the building share counts. The reclassified percent is the part of the building basis a cost segregation study moves into shorter lives. The study sets it. The 20% default is a placeholder, not a prediction for your property.
Months in service and net rent
Year-one depreciation is prorated by months in service. Net rent is income before depreciation, so a lower number produces a bigger paper loss.
Non-passive toggle
Leave it off unless your CPA has told you the loss is non-passive. With it off, the calculator shows the loss as suspended and the year-one tax saving as zero.
Frequently Asked Questions
Is a rental loss from cost segregation always deductible?
No. IRS Publication 925 says a rental activity is generally a passive activity, and a passive loss is generally disallowed against other income and carried forward. A real estate professional who meets the IRS tests (more than half of personal services in real property trades or businesses, and more than 750 hours) can treat qualifying rental activities as non-passive. Your CPA decides whether you qualify.
How does self-employment tax work?
The IRS says self-employment tax is 12.4% for Social Security plus 2.9% for Medicare, applied to 92.35% of net earnings from self-employment, and you can deduct one-half of it. The Social Security part applies only up to an annual wage base, which changes each year. Check the current Schedule SE instructions for the figure.
Is land depreciable?
No. IRS Publication 527 says you can't depreciate the cost of land, and that you must split the purchase price between land and buildings. That is why the calculator asks for a land share.
What recovery period does the calculator use for the building?
39 years for commercial and short-term rental (nonresidential real property) and 27.5 years for long-term residential rental, matching the general depreciation system table in IRS Publication 946. The calculator ignores the mid-month convention, so the first year is slightly overstated.
Is bonus depreciation really 100%?
IRS Tax Topic 704 states that for qualified property acquired and placed in service after January 19, 2025, the special depreciation allowance is 100%. Bonus depreciation applies to the reclassified shorter-life property, not to the 39-year building shell. Confirm with your CPA that your property and acquisition date qualify.
Does depreciation disappear at sale?
No. It lowers your basis and can be recaptured when you sell, which the calculator flags as exposure on the reclassified piece. See the 1031 timeline calculator for the deferral rules and deadlines.
Sources and As-Of Dates
- IRS Topic 554, Self-employment tax: 12.4% plus 2.9%, the 92.35% base, and the one-half deduction.
- IRS Publication 925, Passive Activity and At-Risk Rules: rental activities are generally passive; the 750-hour and more-than-half tests; carryforward of disallowed losses.
- IRS Publication 946, How To Depreciate Property: 27.5-year and 39-year recovery periods and the mid-month convention.
- IRS Publication 527, Residential Rental Property: land is not depreciable; purchase price is split between land and building.
- IRS Tax Topic 704, Depreciation: 100% special depreciation allowance for qualified property acquired and placed in service after January 19, 2025.
Sources last checked October 31, 2026. The Social Security wage base figure used inside the calculator is not restated here because we did not verify it against a current primary source. Education only, not tax or legal advice.
Want the walk-through? Read the S-corp and cost segregation math, explained, or talk to me about a property.
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