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S-Corp Salary Optimizer

Goal: Find the lowest reasonable salary you can take while maintaining the same total cash flow through increased distributions, potentially reducing your overall tax burden.
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Step-by-Step Instructions:

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1. Enter Your Business Information

  • Business Net Income: Your S Corporation's annual net profit

  • Filing Status: Your tax filing status (married filing jointly, single, etc.)

  • State Tax Rate: Your state's income tax rate as a percentage

​2. Set Your Current Scenario

  • Current Salary: What you currently pay yourself in W-2 wages

  • Current Distribution: Additional cash you take from the business as distributions

​3. Test a Proposed Change

  • Proposed Salary: Enter a lower salary amount

  • Proposed Distribution: Increase this amount so your total cash out equals your current scenario

    • Example: If you reduce salary by $50,000, increase distributions by $50,000

​4. Review Your Results

  • Scroll down to see the detailed tax calculations for both scenarios

  • Compare payroll taxes, income taxes, and QBI deductions between the two approaches​​

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How to Interpret the Results:

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  • Total Tax Comparison: Look for the difference in total taxes between scenarios - green means savings, red means additional cost

  • QBI Impact: Higher business income (from salary reductions) can increase your QBI deduction, but wage limitations may apply in higher income ranges

  • Payroll Tax Savings: Reducing salary below the Social Security wage cap ($176,100) generates immediate FICA savings

  • Reasonable Compensation Warning: Pay attention to alerts about salary being too low - the IRS requires "reasonable" compensation for S Corp owners

  • Net Result: The dark summary box at the bottom shows your total tax savings (or cost) and the key drivers behind the change

 

Pro Tip: The optimal salary often balances payroll tax savings against QBI deduction limitations, especially for high-income businesses.

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Let's Give it A Go!

Important Disclaimer

This calculator is for educational and illustrative purposes only and does not constitute tax, legal, or financial advice. The calculations provided are simplified estimates based on general tax rules and may not reflect your specific situation or all applicable tax provisions.

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Professional Consultation Required: Before making any changes to your S Corporation salary structure, you must consult with a qualified tax professional or CPA

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No Guarantees: We make no representations or warranties about the accuracy, completeness, or suitability of this calculator for your specific needs. Tax law is complex and subject to change, and individual circumstances vary significantly.

 

Your Responsibility: Any decisions you make based on this calculator are solely your responsibility. The IRS may challenge salary amounts deemed unreasonably low for S Corporation owners, potentially resulting in penalties and additional taxes.

 

By using this calculator, you acknowledge that you understand these limitations and will seek appropriate professional guidance before implementing any tax strategies.

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By using this site and calculator, you agree to our full Terms, Conditions, and Disclaimers: Terms and Disclaimers

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