S Corp income flows through to your personal return just like a partnership. Although it's considered passive or active income it flows through to your passive income/loss schedule E, which is not subject to self employment tax.
The tricky part here is that, as an S Corp. you are expected to pay yourself a REASONABLE salary, which is subject to self employment tax. The IRS watches for this carefully because many sole proprietors use this as a way to avoid taxation. What is "reasonable" - well, that's up for you to decide.
Anyway, if you are a sole proprietor, the reduction of self employment tax is probably not a good reason for you to become an S Corp. It is like talking out of the other side of...ya know? But if you do decide to do it, just remember that you are required to pay yourself a "reasonable salary".
There is additional analyis that must be done here to fully understand the benefits and/or drawbacks but you will probably need to hire a professional to get that level of analysis.
Hope this helps!
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