Reasonable compensation — adjust to find your optimal salary
W-2 Salary$80,000
% of profit32% of profit
Or type exact salary
$
IRS reasonable comp
$
Net profit
$0
−
W-2 salary
$0
=
Distribution
$0
|
FICA saved
$0
vs
Sole prop FICA
$0
Annual FICA savings
—
vs sole proprietor
S-Corp FICA (employer + employee)
—
On W-2 salary only
Distribution (no FICA)
—
Remaining after salary
Net tax advantage
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After S-Corp costs
Salary as % of net profit
0% (IRS risk)Current: 0%100% (no savings)
Gold markers = IRS reasonable comp range (20–30% of profit)
S-Corp vs Sole Proprietor — full tax comparison
QBI Deduction Optimizer — maximum deduction salary & tax savings
The Sec. 199A QBI deduction is 20% of distribution (not salary). The lowest IRS-defensible salary produces the largest distribution and therefore the maximum QBI deduction. This analyzer finds that exact salary and shows the tax savings vs taking no QBI deduction.
Maximum QBI Deduction — Optimal Salary Structure
Optimal W-2 salary
—
—% of profit
Distribution (QBI basis)
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—% of profit
Max QBI deduction (20%)
—
Sec. 199A deduction
Tax saved from QBI ded.
—
At your marginal rate
How the QBI deduction reduces your tax bill
Max QBI deduction (lowest IRS-defensible salary) Your current salary Below IRS floor — audit risk
QBI deduction phases out above $203,800 (single) / $407,600 (MFJ) for 2026. SSTBs (law, consulting, health, finance) face additional limits above phase-out thresholds. W-2 wage limitation may also apply at higher income levels. Confirm eligibility with your CPA.
IRS Reasonable Compensation: The IRS requires S-Corp owner-employees to pay themselves a reasonable salary for services performed — you cannot skip salary to avoid FICA. While there is no fixed rule, a common guideline is at least 40–60% of net profit, or what you would pay someone else to do your job. Salary that is too low is the #1 S-Corp audit trigger. Your CPA should document the basis for your compensation amount each year.
Enter your net business profit above
Fill in your annual S-Corp net income and adjust the salary slider to see your FICA savings and optimal compensation split.