California S-Corp $800 minimum franchise tax unchanged for 2026

The California Franchise Tax Board has confirmed the $800 minimum franchise tax (RTC §23151) and the 1.5% S-Corp net-income franchise tax (RTC §23186) are unchanged for tax year 2026. The BizTaxMetrics California page usesmax($800, netProfit × 0.015) for the S-Corp recurring cost, which is the correct order-of-magnitude estimate for a small single-owner S-Corp.

How California taxes S Corps differently

California is one of the few states that imposes a separate entity-level franchise tax on S Corporations. Most states recognize the federal S-Corp election and tax the entity as pass-through with no additional entity-level tax. California does not. The FTB charges two overlapping levies on S Corps:

1. The $800 minimum franchise tax under Revenue and Taxation Code §23151. This is the same minimum that applies to LLCs and C Corporations. It is due every year regardless of profitability, and it is due from the first year of operation (new entities get a first-year exemption in some cases, but the minimum kicks in immediately for most S Corps that elect status mid-year).

2. The 1.5% net-income franchise tax under RTC §23186. This is a separate tax on the S Corp’s net income, computed on the California return (Form 100S). The 1.5% rate applies to the entity’s California -source net income, not to the shareholder’s distributive share.

The two taxes stack. An S Corp in California pays whichever is higher between the $800 minimum and the 1.5% computation, but in practice most S Corps with meaningful profit pay the 1.5% amount because it exceeds $800 once net income exceeds roughly $53,333.

Practical impact

At $100,000 net profit, the S-Corp in California pays:

• 1.5% × $100,000 = $1,500

versus the LLC’s $800 floor. That $700 delta (state-only) is the “California penalty” the calculator’s net modeled benefit already subtracts. At $200,000 net profit, the S-Corp’s California franchise tax rises to $3,000 — a $2,200 gap above the LLC’s $800 minimum.

The practical effect is that the S-Corp election in California has a higher breakeven point than in most other states. The federal payroll tax savings must be large enough to overcome both the $800 LLC minimum and the additional 1.5% S-Corp franchise tax before the election produces a net benefit.

When it stops being worth it

For very small LLCs ($40K or less net profit), the LLC’s $800 floor already wipes out most of the federal delta. The S-Corp election in California is rarely worthwhile below ~$70K net profit unless the state fee can be amortized across multiple owners.

The breakeven analysis is straightforward: the federal payroll-tax delta at a given salary level must exceed the California S-Corp franchise tax minus the LLC’s $800 minimum. At the BizTaxMetrics default $100K profit / $50K salary, the federal delta is roughly $8,000–$9,000 (depending on filing status). After California’s $700 incremental cost ($1,500 S-Corp minus $800 LLC), the net modeled benefit is still positive — but significantly smaller than in zero-fee states like Texas or Wyoming.

For business owners considering the S-Corp election in California, the calculator’s California-specific output already reflects this math. Move the profit and salary sliders and watch how the California fee reduces the net benefit compared to states with lower or zero recurring fees.

What the calculator shows

The BizTaxMetrics California state page computes the S-Corp recurring cost as max($800, netProfit × 0.015) — the statutory minimum floor applied to the 1.5% net-income computation. The LLC recurring cost is the $800 minimum. The difference between the two is what gets subtracted from the federal payroll-tax delta in the “Estimated net modeled benefit” line. You can adjust the profit and salary sliders to see how the California fee affects the breakeven at your specific numbers.

Source

• California Franchise Tax Board — Form 100 / Form 100S instructions (2026)
• RTC §23151 (minimum franchise tax)
• RTC §23186 (S-Corp net-income franchise tax)
• BizTaxMetrics California state page