An S-Corp owner pays payroll tax only on a reasonable W-2 salary; the rest can be taken as distributions. This calculator estimates the self-employment tax you save at different salary levels — but the salary must be defensible, and in California you subtract the 1.5% S-Corp franchise tax from the savings.
IRS Compliance Tool
The IRS requires S-Corp owner-employees to pay themselves a "reasonable salary" before taking distributions. This tool estimates a defensible salary based on IRS factors and BLS wage data.
BLS median: $85,000/yr — CPAs, bookkeepers, financial analysts
Check all that apply to your situation.
Estimated Salary Range
$85,000
per year W-2 salary (illustrative estimate only)
Estimate only. Reasonable compensation is a facts-and-circumstances determination. Do not set your W-2 based on this output — verify with a CPA.
W-2 Salary
Subject to payroll tax
Owner Distribution
Avoids FICA — not wages
Your Payroll Tax
FICA on salary only
Estimated Annual FICA Savings
$13,701
vs. sole proprietor paying SE tax on all $200,000
IRS Key Rule: The salary must be comparable to what you'd pay an outside hire for the same role. Document your reasoning with industry wage surveys.
* Estimates use 2024 BLS wage data and FICA rates. Not tax advice — this is not a CPA letter, a tax opinion, or a filing position. Your reasonable salary must be documented for your specific role, market, and duties. Do not set your W-2 based on this tool alone; bring it to a consultation first.
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