Payroll Dad
Tell Dad about your work
✓ Figures checked Oct 31, 2026Wage data: BLS OEWS, May 2025, cross-industry annual wages. BLS tables · State data. Tax figures for 2026 from the SSA and IRS.
Paying yourself through payroll? Read S-corp owner payroll, step by step, or see reasonable salary by profession. Got kids who could help in the business? Try the hire-your-kids calculator.
Ready to pay yourself the S-corp way?
Owner-only payroll is a monthly button press once it’s set up. Set up payroll in Gusto through our link. Gusto’s referral terms say the $100 Visa gift card arrives within 30 days of your first paid payroll. Moving from another provider? The free Switch Planner gives you a step-by-step plan first.
$100 Visa gift card from Gusto when you switch or sign up through our link (by Jan 31, 2027)
The fine print, in plain words: sign up for Gusto payroll through our link by Jan 31, 2027 and run at least one paid payroll. Gusto sends the card within 30 days of your first paid payroll invoice, and your account has to be open when it goes out. The gift card comes from Gusto, not from us, and we don’t add a bonus of our own. Read Gusto’s terms.
How Dad does the math
Plain words first, sources at the bottom. This is an estimate to start a good conversation with your CPA, not a final answer.
- The wage data. BLS Occupational Employment and Wage Statistics, May 2025 (released May 2026): the 25th percentile, median and 75th percentile annual wage for each occupation, nationally and by state.12 BLS figures assume full-time, year-round work (2,080 hours) and cover wage and salary workers. Where BLS doesn’t publish a state figure, Dad uses the national one and says so.
- Why that’s the right yardstick. The IRS asks S-corp owners who work in the business to pay themselves reasonable compensation before taking distributions, and lists what goes into it: training and experience, duties, time and effort, and what comparable businesses pay for similar services.34 Market pay for your role is a big piece of that.
- Hours. Under 40 hours a week, Dad scales the BLS range by your hours ÷ 40. At 40 and up he uses the full-time numbers as they are.
- What the business can pay. A salary plus the employer’s share of payroll tax can’t be more than profit, so the range is capped there.
- Self-employment tax, the other path. Without an S-corp, profit gets self-employment tax: 15.3% (12.4% Social Security + 2.9% Medicare) on 92.35% of net earnings, with the Social Security part stopping at the 2026 wage base of $184,500.56
- S-corp payroll tax. On a salary: Social Security 6.2% from you plus 6.2% from the business on wages up to $184,500, and Medicare 1.45% plus 1.45% on all wages.7 Plus FUTA, 0.6% on the first $7,000 after the usual state credit.8 Distributions don’t carry these taxes.
- What’s not in the math. State unemployment and state taxes, the 0.9% Additional Medicare Tax (which can apply either way), and income-tax effects like the QBI deduction. The cost of running payroll and an S-corp return is listed next to your result. Gusto Solo is $49/month + $6 per person.9 Electing S status uses Form 2553.10
Questions
What is a reasonable salary for an S-corp owner?
A wage that fits the work you do, the time you put in and what comparable businesses pay for similar services.3 There’s no single IRS number, so a range from BLS wage data for your role is a solid starting point to take to your CPA.
How much payroll tax does an S-corp save?
It depends on how much profit is left after a reasonable salary. Self-employment tax hits all your profit; S-corp payroll tax hits only the salary. The calculator shows the gap at the low, middle and high end of your range, before the cost of payroll and the S-corp return.
Should I pick the low end of the range?
Pick the number you can explain. Your duties, hours, experience and local market all count. Many owners land near the middle and keep a short note on why. Your CPA can help you pick.
Where does the wage data come from?
The Bureau of Labor Statistics’ May 2025 Occupational Employment and Wage Statistics, the most recent release.1 Dad downloaded the official national and state files and embedded the 25th, 50th and 75th percentile annual wages.
What if my profit is lower than the salary range?
Then profit is the ceiling. Salary plus the employer’s share of payroll tax can’t be more than the business earns. When profit and a fair salary are close, the S-corp’s payroll tax edge is small, and staying a sole proprietor or LLC for now can be the right call.
Sources, checked Oct 31, 2026
Every number on this page comes from one of these pages. Prices change; if a vendor updates its page, theirs wins.
- BLS: Occupational Employment and Wage Statistics, May 2025 tables
- BLS: OEWS May 2025 state estimates
- IRS: S corporation compensation
- IRS: Fact Sheet 2008-25, wage compensation for S corporation officers
- IRS: Self-employment tax (Social Security and Medicare taxes)
- SSA: Contribution and benefit base (2026: $184,500)
- IRS: Topic 751, Social Security and Medicare withholding rates
- IRS: Topic 759, Form 940 (FUTA tax)
- Gusto: Gusto Solo
- IRS: About Form 2553