State guide · New Jersey · 2026 rules

S corporation in New Jersey: what the election changes

New Jersey recognizes the S election automatically, but its payroll contributions on the owner’s pay are among the highest in the country, and its two official sources disagree on whether distributions count as wages.

Updated October 24, 202610 official sources

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You’ll need: last year’s Schedule C (line 31) and the W-2 from any job you also hold. Everything else starts at a typical value you can change.

State where the business is Each state treats the election differently. The check shows only the questions that matter there.

Net profit for the year, before paying yourself Your business's profit after expenses. Money you take out for yourself does not lower it.

Where do I find this?

Schedule C, line 31 (“Net profit or (loss)”) on last year’s return.

For this year: sales minus business expenses so far, scaled to a full year. Owner draws are not an expense.

Salary you would pay yourself as an S corporation What you would pay yourself through payroll. The IRS expects a reasonable salary for the work you do.

Where do I find this?

No form shows this yet: you choose it. It should be about what you would pay someone else to do your work.

The salary finder just below shows what employees in your job earn in your state or metro area. What the IRS looks at.

Salary finder: what people in your job earn (BLS)

Your job Pick the job closest to what you do most of the week.

Area Pick your metro area if it is listed. Pay varies by area.

Another job I also earn W-2 wages from a job outside this business

Typical values: change them if you know yours

Payroll service, per year typical value Published one-person prices: $492 to $684 a year (October 2026).

Where do I find this?

Your payroll provider’s price page or quote, for one employee: you. Published prices compared.

Extra tax-prep cost for the S-corp return typical value A survey average: the fee for Form 1120-S minus the fee for Schedule C (2020 fees).

Where do I find this?

Ask your preparer what a Form 1120-S (the S corporation’s own return) would cost, then subtract what you pay now for Schedule C.

Your top federal income tax rate Not sure? Keep 22%. It changes line 5 only.

Where do I find this?

Your taxable income is on Form 1040, line 15. Find the rate for that income and your filing status in the IRS rates and brackets table.

Filing status Changes the result only above $200,000 of earnings ($250,000 if married filing jointly, $125,000 if married filing separately).

Where do I find this?

The box checked under Filing Status at the top of your Form 1040.

Choose a state and enter your profit and salary to see the comparison.

A minimum tax by gross receipts

A federal S corporation is a New Jersey S corporation unless its shareholders opt out (privilege periods from December 22, 2022). It pays the Corporation Business Tax minimum set by New Jersey gross receipts: $375 under $100,000, $562 under $250,000, $750 under $500,000, $1,125 under $1 million and $1,500 at $1 million or more.

A sole proprietorship or disregarded single-member LLC pays no Corporation Business Tax today.

Payroll contributions on your salary

The employer pays 2.6825% unemployment, 0.50% disability and 0.1175% workforce development on the first $44,800 of wages in 2026. The worker pays 0.3825% unemployment plus 0.0425% workforce development on the same $44,800, and 0.19% disability plus 0.23% family leave on the first $171,100.

The two official sources differ on distributions. The regulation counts a reasonable salary as wages for these contributions. The employer handbook also lists S-corporation distributions to an officer who performs services as wages. The calculator uses your salary and shows the extra cost of the handbook reading as a range.

Jersey City and Newark

Jersey City charges employers 1% of gross payroll, with no tax below $2,500 of quarterly payroll; wages of Jersey City residents are exempt. Newark charges 1% of wages for work in Newark, with no tax at $2,500 or less a quarter. Neither applies to a sole proprietor’s own earnings.

The optional pass-through business tax

New Jersey’s pass-through business alternative income tax starts at 5.675% and is open to a one-owner S corporation; the owner claims a refundable credit. The calculator leaves it out.

Worked examples

A single-member LLC owner, single filer, 22% federal bracket, default payroll and return costs. The figure is total tax and added costs as an S corporation compared with staying as you are.

Profit / salary	Salary counted	In Newark
$80,000 / $45,000	$972 higher	$1,342 higher
$120,000 / $60,000	$1,213 lower	$718 lower
$200,000 / $90,000	$5,867 lower	$5,125 lower

If New Jersey counts distributions as wages, the contributions rise. The calculator shows that amount under your result.

Starting payroll in New Jersey

The S corporation files Form CBT-100S each year.

New hire paperwork for New Jersey

Other states

All state guides and the map

Sources

Federal figures: IRS Publication 15 (2026), Schedule SE and Form 2553 instructions. Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.

An estimate from public rules, not tax advice.

Ready to elect? See the Form 2553 steps.

Electing S corp status