S-Corp Reasonable Salary Calculator (2026)

An S-Corp owner who works in the business has to take a salary before taking distributions. The salary should match what the business would pay someone else to do the same work.

Distributions don't carry payroll taxes, so a lower salary means a lower tax bill. That is exactly why the IRS reviews it, and why a salary that can't be supported is a common audit issue.

Duties, hours, training and credentials, what similar businesses pay, and how much of the income comes from the owner's own work. No single factor decides it.

The calculator uses Bureau of Labor Statistics wage data (May 2025) for California and the U.S., adjusted for experience, licensing, hours worked and time spent in a second role.

The IRS can treat distributions as wages and assess back payroll taxes, penalties and interest. A written record of how the salary was set makes the difference.

As the business grows or the owner's role changes, the salary should be revisited. A figure that made sense in year one may not hold up in year three.