Self-Employment Tax for 1099 CRNAs: When an S-Corp Election Starts to Make Sense

If you work as a 1099 CRNA, whether you're fully independent, picking up locums, or moonlighting on the side, you've probably noticed that your tax bill looks bigger than income tax alone would explain. That's self-employment tax, and it's the main reason the S-corp conversation comes up so often among CRNAs. Here's how it works, what an S-corp actually changes, and why it isn't the right answer for everyone.

Where the extra tax comes from

When you're a W-2 employee, your employer pays half of your Social Security and Medicare taxes. As a 1099 contractor, you pay both halves yourself. That adds up to 15.3%: 12.4% for Social Security and 2.9% for Medicare, applied to 92.35% of your net self-employment earnings.

In 2026, the Social Security portion applies to the first $184,500 of earnings. The Medicare portion has no cap, and an additional 0.9% Medicare tax applies once income passes certain thresholds. For a CRNA netting a couple hundred thousand dollars, that's a five-figure bill before income tax even enters the picture.

What an S-corp changes (and what it doesn't)

An S-corp doesn't make payroll taxes disappear. It changes what they apply to.

With an S-corp election, you run your practice through an entity, often an LLC that elects S-corp tax treatment, and you pay yourself a W-2 salary through it. Payroll taxes apply to that salary. Any profit left over can be taken as an owner distribution, which isn't subject to self-employment tax. Income tax still applies to all of it either way.

A simple example

Here's an illustration with made-up numbers. Say a 1099 CRNA nets $200,000. Self-employment tax on that comes to roughly $28,200.

Now say the same CRNA runs the work through an S-corp and pays themselves a $120,000 salary. Payroll taxes on that salary come to about $18,400, and the remaining profit taken as a distribution isn't subject to payroll or self-employment tax. The difference is roughly $9,900.

That example is simplified on purpose. It leaves out income tax effects, state rules, and the costs below, and the salary shown is not a recommendation. The right number depends on your actual work, hours, and what others in your field are paid.

What it costs

An S-corp comes with real overhead. You'll need to run payroll and file payroll returns, file a separate S-corp tax return, and keep more detailed books. State requirements vary, and they can add filings or registrations. At lower income levels, those costs can eat up the savings entirely.

The "reasonable salary" rule

The IRS requires S-corp owners who work in the business to be paid reasonable compensation before taking distributions. A salary that looks too low for the work you do and what others in your field earn is one of the most common issues the IRS looks at. Your salary also sets the base for some retirement plan contributions, so it can affect more than payroll tax.

When it may not be a fit

An S-corp tends to work better with steady, predictable income. It may be less helpful if:

• Your income is lower or varies a lot from year to year, as it can with locum work.

• You work in several states, which can make payroll registration more complicated.

• You'd rather keep your setup as simple as possible and the savings would be small.

Timing matters

For an S-corp election to take effect on January 1, the election generally has to be filed by March 15 of that year. If you're thinking about 2027, the fall is a good time to run the numbers rather than waiting until the deadline is close. If you don't have an entity yet, that needs to be set up first. Late-election relief exists in limited cases, but it isn't something to plan around.

The bottom line

For the right CRNA, an S-corp election can reduce self-employment tax, but it's a trade-off, not a trick. The savings depend on your income, your expenses, and how you work.

If you're a 1099 CRNA and want to know where you land, contact Abell & Advisors to talk through your numbers.

This post is general information, not tax advice for your specific situation.