S-Corp Salary Calculator
Calculate optimal salary vs. distribution split for your S-Corp. See potential payroll tax savings while staying compliant with IRS "reasonable compensation" requirements.
After business expenses
Annual Tax Savings
$16,019
57% reduction
IRS Risk Level
Moderate
Generally acceptable
Recommended S-Corp Structure
40% of income
60% of income
Payroll taxes (15.3% total):
S-Corp vs Sole Proprietorship
Pay 15.3% SE tax on entire $200,000 income
Pay 15.3% payroll tax on $80,000 salary only
IRS "Reasonable Compensation" Factors:
- • Training, experience, and responsibilities
- • Time devoted to the business
- • Dividend history and company income
- • Comparable salaries in similar businesses
- • Generally 40-60% of net income is defensible
When Does S-Corp Make Sense?
Income > $60K
S-Corp typically worth it when net business income exceeds $60,000-$80,000 per year
Service Business
Especially beneficial for consultants, freelancers, and service providers with low overhead
Stable Income
Best when income is predictable and you can afford regular payroll costs
S-Corp Additional Costs
These costs reduce your net savings but are often offset by tax savings when income exceeds $80K
Official References
This calculator is based on IRS guidelines and tax regulations:
- IRS S Corporation Information
Official S-Corp tax rules and requirements
- IRS Reasonable Compensation Guidelines
Guidance on shareholder-employee compensation
- IRS Form 1120-S, U.S. Income Tax Return for an S Corporation
S-Corp tax return form and instructions
This calculator provides estimates only. Consult a CPA or tax professional for personalized advice on S-Corp election and reasonable compensation.