If you are a dentist running your own practice and using an S-Corp, then yes, smart tax planning can directly support your family’s financial security. By setting a reasonable salary, taking the rest of your income as S-Corp distributions, and pairing that with retirement and healthcare strategies, you can often keep more of what you earn, smooth out cash flow, and build long term savings for your children and your partner. That is what people usually mean when they talk about CPA for doctors earning 300k+, even if they use fancier language.
I want to walk through this in a way that connects the math to real family life. Not just numbers on a spreadsheet, but things like: can you afford to step back when a child is struggling, can you pay for therapy without panic, or can you help a teenager through school without drowning in debt.
How an S-Corp fits into a dentist’s family life
Most dentists who move to an S-Corp are trying to fix one main problem: high self-employment or payroll taxes chewing through income. The structure can help, but it is not magic. And it is very easy to set it up in a way that helps a little on paper while adding stress at home.
Here is the basic idea in plain terms.
- You create a corporation and elect S-Corp status with the IRS.
- Your corporation receives the practice income.
- You are both owner and employee.
- You pay yourself a W-2 salary.
- Anything above that salary is often taken as an owner distribution.
Salary is subject to payroll taxes. Distributions are not subject to Social Security and Medicare taxes, at least under current law. That gap is where the tax savings can come from. But there is a catch.
A low salary that looks fake can trigger problems with the IRS, which is the last thing a young family needs.
The trick is finding a number that is defensible and still gives your family room to save and breathe. I will go through that next.
Reasonable salary: where tax planning meets parenting stress
There is no simple formula for “reasonable salary.” That can feel frustrating. The IRS looks at what you would pay someone else with your skills to do the same job. So experience, location, type of dentistry, and practice size all matter.
To keep this grounded, think about three questions.
1. Could I defend this salary with real data?
Imagine reading your salary number out loud to an auditor. Would you feel defensive or calm?
- Check surveys for dentist compensation in your area.
- Look at others with similar production and schedule.
- Keep those references in a folder, even just screenshots.
If your collections are, say, 700k and your salary is 80k, that is hard to defend. If your salary is 200k to 260k, that might fit common ranges, depending on the situation. The point is not perfection, just that it passes a straight face test.
2. Does this salary support my monthly family life?
Tax planning often starts with the question “How do I reduce taxes?” I think that is backwards for parents. A better first question is “What fixed monthly number does my family need to feel stable?”
Try sorting costs into two buckets.
- Fixed or hard to cut: housing, food, basic childcare, insurance, minimum loan payments, basic therapy if your child needs it.
- Flexible: travel, eating out, premium brands, upgrades.
Your salary should comfortably cover the fixed bucket, and at least a slice of the flexible one. If your salary is so low that you constantly pull owner distributions to pay for groceries or rent, then the numbers may work on paper but not in your head. Constant money stress seeps into parenting very quickly.
3. Do I have a buffer for child related surprises?
Families do not run on averages. They run on spikes. A new therapy evaluation. A special school program. Orthodontics. A trip to help an aging parent while you pay for childcare at home.
Your cash flow plan is only real if it can handle at least a few big surprises each year without panic.
You can solve that in different ways. Higher salary, a larger savings cushion, or a standing policy that you never distribute below a certain practice cash level. There is no single right choice, but no choice at all is a problem.
Salary vs distributions: connecting taxes to family goals
It might help to see how salary and distributions play off each other for both taxes and home life.
| Item | Higher Salary | Lower Salary + More Distributions |
|---|---|---|
| Payroll taxes | Higher | Lower |
| Social Security benefits later | Generally higher (up to wage cap) | Lower |
| Stable monthly income for family | More predictable | Can be choppy if distributions vary |
| Flexibility during slow months | Less flexible | More flexible if you have reserves |
| Audit risk if “too low” | Lower risk | Higher risk if salary looks unrealistic |
If you care about family stability, you might lean a bit toward the higher salary side, then use distributions in a planned way for savings and one time costs, instead of monthly living money.
Using your S-Corp to protect time with your kids
People talk a lot about dollars. Time is harder to talk about, but for parents it usually matters more. One quiet advantage of careful S-Corp planning is that it can support the choice to work less without wrecking long term goals.
Planning for a lighter clinical schedule
Maybe you want to cut one clinic day to handle school pick ups or to care for a child with extra needs. Without a plan, that drop in revenue hits like a wall. With an S-Corp, you can map out changes over a few years.
- Set your salary with a future lighter schedule in mind, not just the current maximum production year.
- Use good years with higher distributions to build up cash reserves and retirement contributions.
- Practice living on the lower target salary for some months before you actually cut hours.
Many dentists push themselves hard for a decade, then try to slam on the brakes when burnout shows up. The family often feels that shift as chaos. A more gradual plan, tied to S-Corp income choices, can soften it.
Building a “family stability fund” inside the plan
Some people call it an emergency fund. That sounds like it is only for disasters. With kids, the “emergencies” are often things you want to say yes to, not just avoid.
A family stability fund is money set aside so that when your child needs something big, money is not the reason you say no.
Here is one simple approach that fits well with S-Corp distributions.
- Pick a yearly distribution goal, for example 80k after tax.
- Decide in advance that a fixed slice, say 25k, goes to the family stability fund every year.
- Automate transfers to a high yield savings account or conservative investment account.
That fund could cover unpaid leave, new therapy, moving closer to better schools, or taking 3 months mostly off when your teenager is having a really hard time. You may never need all of it. That is fine. The emotional value of just knowing it is there is hard to measure, but very real.
Retirement planning that respects future you and your future kids
Retirement planning can feel distant when you are changing diapers or scheduling orthodontist consults. But your S-Corp structure opens specific retirement paths that can also protect your kids from having to carry you financially later on.
Common retirement options for S-Corp dentists
Here are a few routes many practices use.
- Solo 401(k) or traditional 401(k)
- Defined benefit or cash balance plan, for those with higher incomes and steady profits
- Backdoor Roth strategies, if your income limits direct Roth contributions
The key connection to the S-Corp is your salary level. The amount you are allowed to put into these plans often depends on W-2 wages. If you push salary too low to chase payroll tax savings, you might block yourself from using stronger retirement tools that could help much more in the long run.
This is where “reduce taxes at all costs” can quietly conflict with “support my family across 40 years.” Those two goals are not always the same.
Thinking about your children as future adults
When parents talk about money, it is usually short term: sports fees, school supplies, maybe college. But one day your child will be an adult with their own bills. If you retire without enough savings, they may feel pressure to cover gaps. That can strain relationships, even in close families.
A well designed S-Corp plan can shift income into retirement accounts during high earning years. The tax rules change from time to time, but so far retirement contributions tend to be treated kindly. You may reduce current taxable income, grow assets, and at the same time spare your children from future financial burdens.
It sounds distant. Yet many dentists in their 50s and 60s say they wish they had thought about this earlier.
Health insurance, HSAs, and real life medical needs
Healthcare choices tie into parenting quickly. Kids get sick at the worst moments, and if you have a child with chronic issues you already know how heavy the bills can feel. Your S-Corp structure can affect how you handle insurance and out of pocket costs.
Health insurance as an S-Corp owner
Rules here are a bit technical. In simple terms:
- The S-Corp can pay or reimburse your health insurance premiums.
- Those premiums show up as wages on your W-2, then you may be able to claim a self-employed health insurance deduction.
- The order of steps on the tax return and payroll reports matters.
If that sounds fussy, it is. But when it is set up properly, your out of pocket cost can be lower after tax. Over many years, that adds up to money that can go to your kids rather than to overhead.
Using Health Savings Accounts in a family centered way
If you are on a high deductible health plan, you might be able to use a Health Savings Account. HSAs are a bit odd in that they can work as both a short term and a long term tool.
- Contributions may reduce taxable income.
- Growth can be tax free.
- Withdrawals for medical expenses are tax free.
Some families spend from the HSA every year. Others pay current medical bills from cash flow and let the HSA grow for later. A hybrid approach is fine. For a dentist with solid income, keeping receipts and letting the HSA grow for years can create a pool that later covers braces, surgery, or even your own care in retirement.
Again, the S-Corp part is in how you flow the contributions: payroll vs direct, employer vs employee. The goal is not just to save tax, but to handle healthcare without turning every bill into a crisis conversation at home.
Paying your spouse and involving them in the practice
Many dentists have a spouse who helps with the practice in some way. They may handle calls, books, childcare that supports your long hours, or direct office tasks. The question of whether to pay them through the S-Corp comes up a lot.
Paying a spouse can unlock payroll based benefits for that spouse, such as 401(k) contributions or Social Security credits. It can also create extra payroll taxes and paperwork, and it can blur family boundaries if not handled carefully.
Questions to ask before putting your spouse on payroll
- Do they actually perform work that you would otherwise pay someone else to do?
- Is there a clear job description and time expectation?
- Does paying them allow meaningful extra retirement contributions or other clear tax gains?
Some dentists want to pay a spouse mainly to “get money into their name.” That instinct makes sense emotionally, but without a clear benefit it can just add hassle. You might get more peace of mind by setting up a separate savings or investment account in your spouse’s name and funding that directly from distributions.
Tax planning that strains your marriage is not really tax planning, it is just stress with paperwork.
When in doubt, keep the money flow as simple as you can while still reaching your goals.
Kids, allowances, and paying children through the practice
You might have heard that you can pay your kids from the business for simple tasks and then use that income to fund Roth IRAs or savings in their name. That idea is all over the internet. Some of it is helpful, some of it is fantasy.
When paying your children can work
This tends to work best when:
- The child actually does real, age appropriate work.
- The pay is reasonable for that work.
- You have clear records and can explain the tasks if asked.
Examples could be shredding, filing, cleaning certain areas, simple social media tasks for older teens, or helping with mailers. You cannot realistically pay a 7 year old 15k per year for “modeling” unless there is an actual marketing campaign with their photo on it.
On the positive side, a teenager earning 4k to 6k per year in real wages can have that money moved into a Roth IRA. That Roth could grow for decades. It also gives you a natural way to teach about taxes and savings, using their own numbers instead of abstract lectures.
Where the line gets fuzzy
Some parents stretch this idea past the point of honesty. They write big checks to very young children and call it “wages” even though the kids do nothing for the practice. That might reduce taxes in the short run. It also teaches your children that bending rules is normal.
I would be careful with that. The example you set about money and rules may matter more to your child’s future than any one year of tax savings.
Debt, taxes, and your emotional bandwidth as a parent
Many dentists carry heavy student loans, practice loans, and sometimes a large mortgage. CPAs and advisors often frame the decision as a math problem: should you pay extra on debt or save more. As a parent, your answer might not match the spreadsheet.
How S-Corp income choices change the debt conversation
Here is where salary and distributions come back in again.
- Higher salary creates more predictable cash flow to make fixed loan payments.
- Strong distributions in good years can accelerate principal payments if that helps you sleep.
A pure math answer might say that you should invest extra cash because the return could be higher than the interest cost. True in some cases. But if carrying a large debt balance keeps you up at night, and that tiredness makes you short with your kids, then the “optimal” choice on paper might not be best for your family.
Your S-Corp gives you more knobs to turn: timing of distributions, bonuses, and retirement contributions. Try to use those knobs in a way that supports both your numbers and your mental health.
Safeguarding children with legal and tax aware planning
Child safeguarding is not only about physical safety. Financial stability and legal preparation matter too. Parents in demanding jobs can be so focused on work that they delay decisions about guardianship, life insurance, and estate planning. Your S-Corp income flows can make these decisions easier to fund and follow through on.
Life insurance funded by S-Corp earnings
If the family depends heavily on your dental income, consider what happens if you cannot work. It is not a cheerful thought, but it is a practical one.
- Level term life insurance is often the starting point.
- Your S-Corp salary and distributions give you the budget to pay for enough coverage.
- Think past the mortgage and tuition to therapy, childcare, and time for your partner to adjust.
Some dentists under-insure because the premiums feel high. When you are intentional about S-Corp savings from tax planning, part of that “extra” can quietly fund coverage that keeps your kids housed and supported in the worst case.
Guardians, wills, and who controls what
This part is not fun, and many families avoid it. But a basic will, guardianship designations, and beneficiary updates connect directly to child safety and stability.
Tax planning here is more about avoiding confusion.
- Make sure practice ownership and S-Corp shares are addressed in your planning documents.
- Check that retirement accounts and life insurance have current beneficiaries.
- If you have a child with special needs, ask about special needs trusts so that inheritances do not accidentally disqualify them from support programs.
These topics can feel far from daily parenting, yet in a crisis they decide who raises your child and how money is used for them. That is very much a safeguarding question.
Common S-Corp mistakes that quietly harm family security
I want to point out a few patterns that show up a lot. They are not rare or dramatic, just common and a bit dangerous over time.
1. Chasing only short term tax savings
Some dentists push salary as low as possible, delay retirement savings, skip insurance, and celebrate a lower tax bill. Then ten years pass and they have a thin safety net, tired nerves, and kids who have felt that constant edge.
Taxes matter. But they are one variable among many. A balanced plan may mean paying a bit more tax now in exchange for steadier family life and stronger retirement later.
2. No separation between business and personal cash
When every personal bill is paid straight out of the business account, the S-Corp structure loses meaning. It also becomes almost impossible to see if the practice is healthy on its own.
- Pay yourself a salary on a regular schedule.
- Take planned, recorded distributions.
- Use a personal account for groceries, school costs, and trips.
This separation is not just for the IRS. It helps you think clearly. Kids can sense when parents feel out of control with money, even if they cannot name it.
3. Ignoring spouse’s perspective
Sometimes one partner handles all money decisions and the other avoids them. This can work for a while. Then something goes wrong and the non dentist partner discovers that they never really understood the structure.
Checking in with your spouse about S-Corp choices, salary levels, and savings plans is not only “nice,” it is risk management. If something happens to you, they need at least a rough map of what exists and how it works.
Bringing it all back to parenting and child safeguarding
You might be wondering if all of this detail about salary levels, retirement plans, and HSAs really connects to parenting and child safeguarding. I think it does, but not in a flashy way.
Children feel safest when the adults around them are calm, present, and predictable more than when those adults hit every possible tax target.
An S-Corp is just a tool. Used well, it can support:
- More consistent schedules at home, because income is planned not random.
- Time off when a child needs you, funded by reserves built from tax savings.
- Access to care, tutors, or programs that might be out of reach without careful planning.
- A long term path where your kids are not carrying your financial burdens later on.
Used poorly, it can lead to constant tax anxiety, thin savings, and strained relationships. The structure itself is not the difference. The choices are.
Quick questions parents often ask about S-Corps and family money
Q: What is the single most helpful S-Corp move for my family?
A: For many dentists, setting a realistic salary that covers core family needs, then using distributions only for planned savings, debt pay down, and clear one time costs is the biggest shift. It separates survival money from strategy money.
Q: Should I always lower my salary as much as possible to save payroll taxes?
A: Probably not. If going too low cuts off retirement options, raises audit risk, or forces you to live month to month, the savings might not be worth it. It is better to find a level that is defensible and that matches your family’s reality.
Q: How do I know if my S-Corp plan really supports my kids’ future?
A: Look at three things: do you have a buffer fund for surprises, are you building retirement assets steadily, and can you take needed time away from the chair without panic. If the honest answer is yes to those three, then your S-Corp is probably helping not hurting your family’s long term security.