How Will Dentist Be Taxed?

W-2 income gets taxed with Medicaid/Medicare, SS, and Income.

Simple IRA contribution gets taxed with Medicaid/Medicare and SS

Distributions for an S-Corp gets taxed with Income only…..

Is it safe to say the average dentist makes 120K/year, therefore anything above that should be paid as a distribution? For example if I take home 200K, I would have 120K go as W-2 and then the other 80K as a distribution from the S-Corp. But I also make my 11.5K contribution to the Simple IRA, which would mean my yearly income is:

120 + 80 + 11.5 = 211.5K, but each chunk is taxed differently.

Now if I am also paying my wife and she gets 36K for W-2 and 11.5K for Simple IRA… filing together 259K and Obama hits us with the over 250K tax? So the only extra Obama tax would be on that 9K over the limit or on the total amount?

Now when all is said and done and all write offs have been madeā€¦at the end of the year my S-Corp still has 50K in profit that I choose not to take home because I want to build just in case shit happens account for my office that gets taxed as a corporate profit?

What level would that corporate tax on the extra 50K?

I have an accountant and we are meeting soon to go over all this, just want to educate myself a bit before our meeting with this little hypothetical situation.

The $50k will be taxed on your individual return for federal tax purposes and most states, NOT taxed at the corporate level, whether you take the cash or not.

Thanks Tim. Are my other statements true? Do we know what the Obama tax will end up being?

I see nothing really wrong with everything else you said, but haven’t been worried about the Obama tax just yet. There are too many other planning issues for 2010 still occurring.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

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