Reasonable Salary Calculator
Estimate a defensible W-2 salary for an S corp owner, by state, and see the payroll-tax vs. income-tax trade-off — including a custom salary/distribution split you enter.
Income vs. Distribution: You pay income tax on the S-Corp’s net profits reported on your Schedule K-1, whether you actually withdraw the cash or leave it in the business.The "Reasonable Salary" Rule: If you actively work in your S-Corp, the IRS requires you to pay yourself a reasonable W-2 salary before you can take tax-free distributions. Wages are subject to standard payroll taxes, while the rest can be pulled as distributions| Low | Recommended | High | Custom |
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* Estimates for planning discussion only — not tax advice or a substitute for a full return. Federal figures use 2026 IRS brackets and the 2026 Social Security wage base ($184,500). State figures use the latest published (2025) single-filer brackets applied to combined salary + distribution, with no state-specific standard deduction, exemption, or local/city tax, and exclude entity-level add-ons (e.g., California's S corp franchise tax and uncapped SDI payroll tax). QBI is modeled at a flat 20% with no phase-out. "Reasonable salary" has no statutory formula — the IRS applies a multi-factor facts-and-circumstances test (see Rev. Rul. 74-44 and Watson v. Commissioner). Use this alongside documented market-wage research for the client's actual role.