Calculator

Business Profile

Professional service firms must pay a higher percentage of profits as salary compared to businesses that rely on heavy equipment or inventory.

Enter a percentage between 10% and 90%.

Enter a direct salary figure. The remaining profit will automatically be allocated to owner's draw.

Suggested Salary Split

Total Available Profit: $0
W-2 Salary
(Subject to 15.3% payroll tax) $0
Owner's Draw
(Exempt from payroll tax) $0

Disclaimer: This calculator provides a rough estimate using the "percentage of profits" method. The IRS does not explicitly endorse a fixed percentage. To survive an audit, your salary must match what you would pay a stranger to do your exact job.

What this calculator includes

  • W-2 Salary Calculation: Uses industry-standard rule-of-thumb percentages to separate your business profit into wages.
  • Owner's Draw: Calculates the remaining un-taxed (by FICA) distribution available to you as the shareholder.

What this calculator does not include

  • Exact IRS Guidance: The IRS refuses to provide a safe-harbor percentage. This tool uses CPA-recommended heuristics, not legal statute.
  • Geographic Data: A reasonable salary for a graphic designer in San Francisco is very different from one in rural Ohio.

How to use the result

Use the W-2 Salary amount to set up your payroll software (like Gusto or OnPay). If you run payroll monthly, divide the W-2 Salary by 12. You can take the Owner's Draw at whatever frequency you prefer by simply transferring money from your business checking account to your personal checking account.

Disclaimer

This tool is for educational estimates only. It provides a generalized overview of profit-splitting strategies. It does not replace the advice of a licensed CPA. Always consult a tax professional to perform a formal reasonable salary study for your specific business.