Once you own a practice, a deceptively simple question quietly determines a large slice of your tax bill: how do you actually pay yourself? The money is sitting there in the business account. Getting it into your personal account without handing the IRS more than you owe — or, worse, inviting an audit — is its own small discipline. Here is how it works, in plain terms. (Treat this as an explainer, not tax advice; the figures below are real, but your situation needs a dental CPA.)

Two ways money leaves the practice

If your practice is a sole proprietorship or a single member LLC, the default for many new owners, the math is blunt: essentially all of your net profit is hit with self-employment tax, a 15.3% levy funding Social Security (12.4%) and Medicare (2.9%), on top of income tax. The Social Security portion only applies up to a wage base, $184,500 in 2026, but the 2.9% Medicare piece never stops, and high earners owe an extra 0.9% above $200,000. Simple structure, but you pay that tax on every dollar of profit.

The S-corporation election changes the picture, which is why so many established practices make it. As an S-corp owner who works in the business, you split what you take out into two buckets: a W-2 salary, which is subject to payroll tax, and distributions of the remaining profit, which generally are not. Pay yourself a reasonable salary, then take the rest as distributions, and you legally sidestep the 15.3%/2.9% on that second bucket. On a profitable practice, that difference is real money.

The catch: the “reasonable salary” test

Here is where dentists get themselves in trouble. The IRS requires an S-corp owner who provides services to pay reasonable compensation — a genuine market-rate salary — before taking distributions. The standard is “an amount paid for like services by like enterprises under like circumstances.” In plain English: roughly what you would have to pay someone else to do your clinical work.

You cannot simply pay yourself a token salary and route the rest through distributions to dodge payroll tax. And despite what you will read online, there is no safe harbor — the “60/40” and “50/50” splits that circulate on dental forums are myths the IRS has never adopted. What matters is your actual role: training, hours, duties, and comparable pay. An owner dentist clearing $400,000 who pays himself a $40,000 salary is, in the words of more than one CPA, screaming for an audit. If the IRS decides your salary was unreasonably low, it can recharacterize your distributions as wages and add back the payroll taxes, plus penalties and interest.

So what is defensible? Anchor to what your clinical labor is worth on the open market. The Bureau of Labor Statistics puts the median dentist wage at $179,210; a reasonable-compensation study or a dental-specific CPA can refine that for your production, specialty, and region. The number should be one you could justify to an auditor with a straight face.

The mechanics people botch

The structure only protects you if you actually run it like one:

The QBI wrinkle worth knowing

One more piece, freshly settled: the 20% qualified business income (QBI) deduction, once scheduled to expire at the end of 2025, was made permanent by the 2025 tax law. But there is a catch aimed squarely at dentists. Dentistry is a “specified service trade or business,” so the deduction phases out across roughly $202,000 to $277,000 of taxable income for single filers, and $404,000 to $554,000 for joint filers, in 2026. Above the top of that range, it is gone entirely. For many owner-dentists the QBI deduction is simply off the table at their income — which, ironically, removes one of the trade-offs (a higher salary lowers your QBI deduction) that complicates the salary decision for lower earners.

The bottom line

Paying yourself well is not the hard part; paying yourself correctly is. The S-corp salary plus distribution structure can trim a meaningful amount off a profitable practice’s tax bill, but the savings are bounded by the wage base and the reasonable salary requirement, and the failure modes (a lowball salary, skipped payroll, missed estimates) are expensive. The move that pays for itself is not a clever percentage; it is hiring a CPA who works with dental practices, setting a salary you can defend, and running the machinery cleanly. Do that, and how you pay yourself becomes a quiet advantage instead of an audit waiting to happen.