2026 S-corp salary range
Free reasonable salary calculator for S corp owners. Enter your profit, hours, and what your work would cost to replace, and get a defensible S corp reasonable salary range with the payroll-tax math at each level.
Before you set it
Salary is the part of your S-corp profit that pays 15.3% in payroll taxes; distributions are the part that does not. Set the salary too high and you erase the savings the election exists for. Set it too low and you attract exactly the scrutiny the IRS reserves for S-corps, where reclassified distributions come back with payroll taxes, penalties, and interest attached.
Replacement cost asks what hiring your work would cost. The profit-share band recognizes that in most solo businesses part of the profit comes from brand, audience, and leverage rather than billable hours. A documented range built from both is far more defensible than a round number picked to minimize tax, because it tracks the factors the IRS actually weighs: your duties, your hours, comparable pay, and where the profit really comes from.
The full election-to-payroll sequence →The owners who win reasonable-comp disputes are the ones with a memo: the range, the anchors, the hours, and the reasoning, written down before the year starts. The email version of your result includes a one-page memo template for exactly that. Revisit it when profit changes materially, not every quarter.
See what the split saves you at your income →Want the salary set, documented, and run through payroll by real accountants?
Talk to UsFree 30-minute review. No pitch deck.
No. The statute says the salary must be reasonable and stops there. Courts and the IRS weigh your training and duties, the time you put in, what comparable businesses pay for comparable work, the company's income and dividend history, and whether the profit comes from your labor or from capital, systems, and other people. The calculator blends two anchors that map to those factors.
The IRS can reclassify distributions as wages. The payroll taxes come back with penalties and interest attached, and the savings the election existed for disappear for those years. Too high erases the savings quietly instead. The point is a documented number in between.
It is a rule of thumb, not law, and it is not what courts apply. A round split picked to minimize tax is exactly the kind of number that loses a dispute. A range built from replacement cost and profit share, written down before the year starts, is far more defensible.
Usually above roughly $80,000 of profit, once the savings clear the cost of running payroll and a separate return. Run the savings calculator with your numbers first; the salary range on this page only matters once the election makes sense.
A starting range, not a determination. Reasonable compensation depends on your facts and is decided case by case. Not tax or legal advice.
Terms behind this calculator
S election/Shareholder distributions/Form 1120-S/Accumulated adjustments account
We set a documented reasonable salary and revisit it as your profit changes.