How to Pay Yourself as a Doctor: Salary, Distributions, and Taxes Explained
- Aug 21
- 2 min read
Your medical practice isn’t just about patient care—it’s also your livelihood. Yet many doctors and dentists are unclear on how to pay themselves properly, leading to cash flow stress, tax overpayments, or IRS issues. At ISTAXPro, we provide accurate bookkeeping and tax return preparation for doctors, ensuring your compensation aligns with tax rules so you can confidently pay yourself while protecting your income.
Salary vs. Distributions: What’s the Difference?
Salary (W-2 Wages)
If your practice is structured as an S-Corp, you’re required to pay yourself a “reasonable salary.”
● Subject to payroll taxes (Social Security and Medicare)
● Provides steady, predictable income
● Required to maintain IRS compliance
Distributions (Owner Draws)
After paying yourself a reasonable salary, you may take distributions from your practice’s profits:
● Not subject to self-employment tax, providing potential tax savings
● Must be supported by clean, accurate books to determine availability
● Should be planned carefully to maintain cash flow
Note: If you operate as a sole proprietor or an LLC taxed as a sole proprietorship, your net income is subject to self-employment taxes, and distributions are not treated separately.
How Much Should You Pay Yourself?
The IRS requires S-Corp owners to take a “reasonable salary,” considering:
● Industry standards for your specialty and location
● Hours worked and responsibilities
● Practice profitability
Overpaying increases unnecessary payroll taxes, while underpaying can trigger IRS scrutiny.
Tax Considerations
● Payroll Taxes: Apply to salary payments
● Income Taxes: Apply to both salary and distributions
● Estimated Taxes: Required for distributions since taxes are not withheld like on a paycheck
● State Taxes: Vary by location and must be tracked accurately
Clean, current books ensure you know how much you can safely pay yourself while staying compliant.
Why Paying Yourself Correctly Matters
●Avoids IRS penalties for unreasonable compensation
●Potentially reduces overall taxes by balancing salary and distributions
● Supports consistent personal income and practice cash flow
● Eases planning for retirement contributions and estimated taxes
How ISTAXPro Supports Your Practice
At ISTAXPro, we help you:
● Maintain organized, accurate bookkeeping using QuickBooks
● Track your income, expenses, and owner equity
● Calculate reasonable salary aligned with IRS guidelines
● Guide your distribution planning based on your books
● Prepare accurate, compliant tax returns that reflect your compensation structure
Pay Yourself with Confidence
Your medical practice should support your lifestyle and financial goals while maintaining compliance and tax efficiency.
Contact ISTAXPro today to get your bookkeeping and tax filings organized
so you can confidently pay yourself
while focusing on patient care.
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