S Corp Owner Compensation Optimizer

Enter profit before any owner salary, owner health premiums, employer payroll taxes, owner retirement contributions and the added cost of running the corporation. The tool subtracts each of those itself, so both structures start from the same dollar.

Everything outside the business. These are constant across the scenarios, but they decide which bracket the next dollar lands in and whether the §199A threshold is crossed — so they change the answer.

Optional, and zero by default — but both change the ranking. Owner health premiums run through W-2 box 1 in an S corp, which makes them count toward the §199A wage test. And the employer retirement contribution is capped at 25% of W-2 salary in an S corp against roughly 20% of net earnings as a sole proprietor.

Split the year into the jobs actually performed and price each one at what the market pays for that job. This is the approach that holds up for an owner whose work is a mix of roles, and it sits before the tax numbers here on purpose, so the floor is not reverse-engineered from the answer.

Each adjustment needs a reason written next to it, not just a percentage. An unexplained downward adjustment is the first thing an examiner removes.

Five levels against the sole proprietorship baseline. Any level below the documented floor is flagged — it may still be the cheapest column, and that is exactly the situation the floor exists to override.

• Self-employment tax on 92.35% of Schedule C profit, with the OASDI portion capped at the wage base net of other household wages, Medicare on the whole, and the 0.9% additional Medicare tax above the statutory threshold. Half of the OASDI and Medicare portions is deducted; the additional Medicare tax is not.
• S corp: employer and employee FICA on cash salary. Employer OASDI is capped at the wage base without regard to outside wages; employee OASDI is credited for outside wages, as the excess-withholding credit would do on the return.
• §199A at 20% of QBI, limited by the greater of 50% of W-2 wages or 25% of wages plus 2.5% of UBIA once taxable income passes the threshold, phased in across the range, with the SSTB haircut applied to QBI, wages and UBIA together. Capped at 20% of taxable income less net capital gain.
• Owner health premiums are added to W-2 box 1, count toward the wage test, and are deducted above the line. Elective deferrals reduce box 1 but not FICA wages, and are added back for the wage test.
• Employer retirement contributions are capped at 25% of salary for the S corp and at the equivalent 20% of net earnings after half the SE tax for the sole proprietor, and reduce QBI under both structures.
• State tax is a flat rate on AGI with no state QBI deduction. It is a proxy, not a state computation, and it ignores any pass-through entity tax election.

• No pass-through entity tax election, no credit for taxes paid to other states, no local or city tax.
• No net investment income tax, no AMT, no itemized deduction limitation, no dependants or credits, no senior deduction, no tips or overtime deduction.
• No stock or debt basis limits. A distribution in excess of basis is taxable and is not modelled here.
• No state payroll cost — unemployment, disability, family leave — which an S corp incurs on the owner's salary and a sole proprietor generally does not. Add it to the extra annual cost field.
• No fiscal-year, short-year or mid-year conversion effects. Every figure is a full twelve months.
• Outside household W-2 wages are treated as income without their own payroll tax. That is identical in every column, so it does not affect any comparison.

Confirm these against the revenue procedure and the Social Security Administration announcement for the year before any of them reaches a return.