Founder Salary Optimizer

Set the reasonable W-2 salary that maximizes S-Corp tax savings without IRS risk.

Net business profit before owner pay $200,000

Market salary for your role $95,000

What you would pay someone else to do your job.

Salary as % of profit 50%

Marginal income tax rate 24%

Estimated annual tax savings

salary $0, distributions $0

Payroll tax on salary

vs $0 self-employment tax as a sole prop

IRS risk level

Low

salary is 0% of market rate

Tax savings vs payroll tax at every salary level

💡 Reasonable compensation check

Founder Salary Optimizer

Once you elect S-Corp status, the salary you pay yourself becomes the most important tax number in the business. Every dollar classified as salary carries 15.3% payroll tax. Every dollar taken as a distribution does not. The temptation is to set salary as low as possible, but the IRS requires reasonable compensation, and if it decides your salary is a fiction it can reclassify distributions as wages and add back taxes and penalties. Most founders pick a round number without checking it against market rate or share of profit, which is exactly what an auditor checks first.

Enter net business profit before owner pay and the market salary for your role, meaning what you would pay someone else to do your job. Then set salary as a percentage of profit with the slider, along with your marginal income tax rate. The calculator computes payroll tax on that salary using 2026 federal figures, including the $184,500 Social Security wage base, compares it to the self-employment tax you would owe on the full profit as a sole proprietor, and adjusts for the deductible employer half to produce estimated annual tax savings as the headline, with the salary and distribution split beneath it. The two stats show payroll tax on salary against sole-prop self-employment tax, and an IRS risk level of Low, Moderate, or High. Under 60% of market rate or under 30% of profit is flagged High.

The chart plots two lines across salary levels from 20% to 100% of profit. The solid sage line is tax savings, and the dashed gold line is payroll tax. Savings are highest at the left, where salary is lowest, and fall to zero at 100%, where everything is salary and nothing is left to distribute. The sweet spot is not the far left. A good position sits where the savings line is still high but salary clears 60% of market rate and 30% of profit. If your setting is in the high-risk zone, the callout shows a defensible floor and what it still saves, which is usually most of the number.

Predictable Income treats business income as one of three streams and insists on running the math before deciding, and salary is a decision with a tax consequence every payroll cycle. Set it once, deliberately, with the trade-off in front of you, rather than defaulting to whatever your payroll provider suggested. Re-run this every year when you set the coming year's salary, and whenever profit or the market rate for your role moves.