Salary vs Distribution Calculator for Home Services

If your home services company is structured as an S-Corp, the salary-vs-distribution split is one of the most impactful tax decisions you will make each year. As an S-Corp owner, you must pay yourself a "reasonable salary" that is subject to self-employment taxes (15.3% for Social Security and Medicare combined), but any profits above that salary can be taken as distributions that avoid self-employment tax. The IRS defines "reasonable" based on what you would pay someone to do your job in the open market. For a home services business owner who also runs jobs in the field, reasonable salary benchmarks range from $55,000 to $90,000 depending on trade, market, and role. An owner-operator plumber in a mid-size market might set salary at $70,000 and take $40,000 in distributions, saving roughly $6,100 in self-employment tax compared to taking the full $110,000 as salary. But set the salary too low and you invite an IRS audit. The general rule of thumb is salary should represent 40 to 60% of total owner compensation, though this varies by how involved you are in daily operations. This calculator models the tax impact of different splits so you can find the sweet spot that maximizes your take-home pay without triggering IRS scrutiny.