S-corp reasonable salary by profession

Reasonable salary by profession

National annual wages for employees in each occupation. Each page has all 50 states plus DC.³⁴

BLS measures what employers pay employees. It doesn’t cover owners or the self-employed, and annual figures assume full-time hours.⁵

How to use these numbers

1. Find your profession and your state. The state row is usually a better fit than the national one.
2. Pick a spot in the range. Newer practice or fewer hours can point toward the 25th percentile. Long experience, a specialty or a busy schedule can point toward the 75th.
3. Account for the management work. Running the business counts as services too, so owners often blend in a manager’s pay.¹
4. Check it against profit. Reasonable compensation never exceeds what you actually receive.¹
5. Write down why, run it through payroll on a steady schedule, and revisit it each year.

What the IRS looks at

An S corporation pays a reasonable salary to an owner who works in the business before taking distributions.¹ The tax code doesn’t set a number.² The IRS lists factors instead, and they make a good worksheet:¹

• Training and experience. Your license, years in the field and specialties.
• Duties and responsibilities. Everything you do, including the admin and management work.
• Time and effort devoted to the business. Full-time, part-time or somewhere between.
• Dividend history. How distributions have compared to salary over the years.
• Payments to non-shareholder employees. What you pay people doing similar work.
• Timing and manner of paying bonuses to key people. Regular and planned, or whenever there’s cash.
• What comparable businesses pay for similar services. The BLS tables on this page are a starting point.
• Compensation agreements. A written plan for your own pay.
• The use of a formula to determine compensation. A method you can repeat and explain.

The IRS also points to where the money comes from: your own services, the work of employees who aren’t owners, and capital and equipment. Receipts from your own services belong in salary. Receipts from the other two can come out as distributions.¹ Administrative work you do for the rest of the business counts as services too.¹ And reasonable compensation never exceeds what you actually receive from the company.¹

Pick your number and back it with a one-page memo

S-corp profit comes out two ways: a paycheck and distributions. A salary that fits the job you actually do is what keeps that split working for you, year after year. Distributions don’t carry Social Security and Medicare tax.¹

1. Write down your job. Duties, hours, training, experience. That’s the backbone of your number.
2. Pull comps. What do similar businesses in your area pay someone to do your job? Save job postings or salary surveys with the date you found them. The tables above and the calculator give you a BLS range to start from.
3. Use the IRS’s own checklist. Walk your number past each factor listed above: training and experience, duties, time devoted, dividend history, pay to non-owner employees, bonus timing, comparable pay, compensation agreements, and formula-based approaches.¹
4. Run it through payroll. Pay yourself on a regular schedule with withholding, like any employee. Then take distributions on top.
5. Keep a one-page memo in your corporate records each year: duties, comps, the salary you picked, and why. Update it when your role or the business changes.
6. Revisit every year. As the business grows, or you hire people who take over tasks, your number can move too.

The 2026 numbers: Social Security wage base $184,500. Employee FICA is 7.65% (6.2% Social Security + 1.45% Medicare), and the business pays a matching share; the self-employed rate is 15.3%.⁶ The 1.45% Medicare has no wage cap, and an extra 0.9% Medicare tax applies to earnings over $200,000 ($250,000 married filing jointly).⁷

Run it by your CPA. Your CPA is your co-pilot here. Bring the memo and the comps and pick the number together. When your homework is done, it’s a short, friendly meeting.

Once your salary is set, these can stack on top: owner health insurance through payroll, an accountable plan, a Solo 401(k), and a state PTET election. Still deciding whether to elect? See S-corp break-even math.

2026 figures to know

2026 figures: Social Security 6.2% each for employer and employee on wages up to $184,500, Medicare 1.45% each with no cap⁸⁹, and FUTA at 6.0% on the first $7,000, which nets to 0.6% for employers who get the full 5.4% state credit.¹⁰ Self-employment tax is 15.3%, 12.4% for Social Security and 2.9% for Medicare¹¹, figured here on 92.35% of net profit, the Schedule SE method. These leave out the 0.9% Additional Medicare Tax on high wages, state taxes and income tax.

The S-corp salary calculator runs these for your role, state, hours and profit. For the bigger picture, see how to pay yourself from an S corp and running owner payroll.

Every business is a little different, so check with your CPA for your situation. Good CPAs love an owner who shows up with the homework done.

FAQ: S-corp reasonable salary