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S Corporation Salary vs Distribution Payroll Tax Calculator

How much salary is reasonable, and what does the rest save in payroll tax?

Payroll tax at a chosen salary against self-employment tax on the whole profit, with salary as a share of profit.

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  • Free, no sign-up
Your figures
Example figuresIllustrative only. Type over them with your own.
Payroll tax difference
$8,954
Payroll tax saved against sole proprietor SE tax
Salary
$80,000
Distribution
$63,880
Drawn to one scale
Salary$80,000
Distribution$63,880
Payroll tax on the salary (employer and employee)$12,240
Self-employment tax on all profit as a sole proprietor$21,194
Payroll tax difference$8,954
All results
MeasureResult
Salary$80,000
Distribution$63,880
Salary as a share of profit53.33%
Payroll tax on the salary (employer and employee)$12,240
Self-employment tax on all profit as a sole proprietor$21,194
Payroll tax difference$8,954
How this was worked out
Work shownrecomputed as you type
Payroll tax = 12.4% x min(salary, $184,500) + 2.9% x salary
Sole proprietor comparison = self-employment tax on the whole profit
Distribution = profit - salary - employer half of payroll tax
Difference = self-employment tax - payroll tax

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Payroll tax = 12.4% x min(salary, $184,500) + 2.9% x salary
  • Sole proprietor comparison = self-employment tax on the whole profit
  • Distribution = profit - salary - employer half of payroll tax
  • Difference = self-employment tax - payroll tax

How it works

Tax year: 2026.

An S corporation must pay a shareholder-employee reasonable compensation for services before non-wage distributions. Salary bears Social Security (12.4 percent to the $184,500 wage base) and Medicare (2.9 percent) tax, shared by employee and company. Distributions do not. The tool compares payroll tax at the salary you enter with self-employment tax on the whole profit as a sole proprietor.

The IRS considers training and experience, duties, time devoted, dividend history, pay to non-shareholder employees, comparable pay in similar businesses and compensation agreements. Enter your own supported salary. Income tax, QBI and state effects are outside the tool.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

How does the IRS test reasonable compensation?

By the factors above, including what comparable businesses pay for similar services.

Are distributions subject to payroll tax?

No, but only after reasonable compensation has been paid as wages.

Does a lower salary change the QBI deduction?

Yes. Reasonable compensation is not QBI, and wages affect the QBI limit, so run the QBI tool as well.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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