2026 tax year
What salary should you pay yourself?
The arithmetic always points at the lowest number. That is exactly why it is not the answer.
An S corporation owner takes some profit as salary, which carries payroll tax, and the rest as a distribution, which does not. Lower the salary and the tax falls. There is no point on the curve where that stops being true, so any calculator promising an optimal salary is telling you to go as low as you dare.
The constraint is not arithmetic, it is the reasonable compensation rule: your salary has to be defensible for the work you actually do. Set it too low and the tax authority can reclassify the difference and charge back payroll tax with interest and penalties. So this shows the whole range and what each choice is worth, and leaves the judgment where it belongs.
Calculator
Enter your figures above and press Calculate.
What makes a salary defensible
- What you would have to pay someone else to do your job.
- The hours you actually work in the business, and what share of the profit your own labor generates rather than capital or staff.
- Comparable pay in your industry and region, this is the evidence that matters if the figure is ever questioned.
- Consistency. A salary that moves inversely to profit every year describes the strategy rather than the work.
Related
General information, not tax advice. Reasonable compensation is a facts-and-circumstances judgment, take advice before settling on a figure.