S-Corp Salary Calculator
See how much you could save in self-employment taxes by electing S-Corp status — and find the right reasonable compensation salary for your business.
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Your Proposed Salary Split
Uses 2026 federal rates, single filer, standard deduction. State taxes, QBI deduction, and retirement contributions not included. For illustration only — not tax advice.
Sole Prop / LLC
S-Corporation
Estimated Annual Savings
By paying yourself a 40% salary ($48,000) and taking the rest as a distribution, you avoid SE tax on $72,000.
Important: S-Corp savings require running payroll, filing Form 1120-S, and paying yourself a "reasonable" salary. We handle all of this for you.
What Is "Reasonable Compensation" for an S-Corp?
The IRS requires S-Corp owner-employees to pay themselves a "reasonable" salary before taking distributions. There's no exact formula — but the IRS looks at what you'd pay someone else to do your job.
Common benchmarks: Most advisors recommend 40–60% of net profit as salary, depending on your industry, role, and hours worked. The IRS has challenged salaries as low as $0 and as high as 100% of profit.
Why it matters: Too low a salary = IRS audit risk. Too high = you lose the SE tax savings that made the S-Corp election worthwhile in the first place.
The sweet spot is a documented, defensible salary that reflects your market value — typically supported by industry wage data, your hours, and your business's profitability.
Ready to Make the S-Corp Election?
We handle the Form 2553 election, set up payroll, file your 1120-S, and make sure your salary is documented and defensible. Start with a free consultation.