S-Corp Reasonable Salary 2026 by Industry Calculator
Estimate a defensible S-Corp reasonable salary 2026 using BLS Occupational Employment Statistics medians by industry, an RCReports-style range, and an IRS audit-risk score based on your salary-to-distribution split.
| BLS OES median (full-time) | — |
| Hours adjustment | — |
| Low-end (25th percentile-ish) | — |
| High-end (75th percentile-ish) | — |
| Salary share of net profit | — |
| Distribution portion | — |
| Suggested reasonable salary | — |
The S-Corp reasonable salary 2026 rule comes from IRS Fact Sheet 2008-25, which requires shareholder-employees to take a wage that reflects what they would pay a non-owner to do the same work. The IRS uses BLS Occupational Employment Statistics medians as a starting benchmark.
How the IRS Tests Reasonable Compensation
Auditors weigh nine factors from Watson v. Commissioner and Fact Sheet 2008-25: training, duties, time devoted, what comparable businesses pay, payments to non-shareholder employees, dividend history, agreements, use of bonuses, and what an outside firm would pay. A salary far below a BLS median or below other employees inside your own S-Corp is the single biggest red flag.
BLS OES Medians as Your Anchor
Pull your occupation code from BLS OES May 2024 data (used for 2026 planning). Tech (15-1252) median is $130,160. Real estate agents (41-9022) median is $56,620. Medical (29-1228) ranges over $239,200. Adjust for hours worked and local wage index. RCReports and similar tools use this same baseline plus a percentile range to defend the number.
The 60/40 Rule of Thumb (and Its Limits)
A popular guideline says split 60% salary / 40% distributions of net profit. It is not in the Code or regs — it is a heuristic. The IRS has won cases where owners took $24,000 salary on $200,000 net (Watson, 2010, recharacterized to $93,000 salary). Use BLS medians plus the 60/40 floor, not 60/40 alone.
Documentation That Wins Audits
Keep a reasonable-comp study on file — BLS occupation, hours, duties, local wage adjustment. Run payroll through a real provider (Gusto, ADP) with W-2s issued. Pay yourself before taking distributions in any month. If profit drops, lower the salary the next year with a board resolution, do not let it sit static. Last updated May 2026.