Salary vs Distribution Calculator for Consulting

For consulting business owners structured as S-Corps — which is extremely common in consulting due to the tax advantages — the salary vs. distribution decision is one of the most consequential financial choices you'll make each year. Here's why it matters: as an S-Corp consulting firm owner, you must pay yourself a "reasonable salary" that's subject to payroll taxes (15.3% combined employer and employee FICA on the first $168,600 in 2024). Any profit above that reasonable salary can be taken as a distribution, which is not subject to self-employment or FICA taxes — only income tax. For a high-earning consultant netting $250,000, the difference between taking it all as salary versus optimizing the salary/distribution split can be $15,000–$25,000 in annual tax savings. The IRS defines "reasonable salary" based on what a similarly qualified person would earn doing similar work — for a management consultant, that might be $100,000–$150,000 depending on market and specialty. Setting your consulting salary too low invites an IRS audit; setting it too high wastes the S-Corp tax advantage. The sweet spot for most consulting firm owners is setting salary at 40–60% of net profit (within the reasonable salary range for your specialty) and taking the remainder as distributions. This calculator helps you model different salary/distribution splits so you can see the tax impact and work with your CPA to find the optimal balance for your consulting income level.