Direct Care Tax Strategy

Is your practice big enough for an S‑Corp yet?

An S-Corp election saves you self-employment tax on the profit you don't pay yourself as salary. It also costs you a second tax return, payroll, and a few state filings. This runs both sides and shows you where the line falls for your practice.

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Your practice's profit after expenses — the number on line 31 of your Schedule C.

$
$25K$750K

Only affects the 0.9% additional Medicare tax above $200K single / $250K joint.

Above break-even

Estimated net annual savings

$3,316

Where you sit

$0$75K$150K$225K$300K+

Line by line

Modeled on a W-2 salary of $70,000 — 58.3% of net income.

What you stop paying

Self-employment tax as a sole proprietor 15.3% on $110,820 (92.35% of net income) $17,662

What you start paying

Payroll tax on your W-2 salary 15.3% on $72,917 — employee and employer halves −$11,156
Second tax return (Form 1120-S) The S-Corp files its own return on top of your 1040 −$2,000
Payroll software and filings $60/month — quarterly 941s, W-2, annual reconciliation −$720
State unemployment insurance 1.0% on the first $12,000 of wages −$120
Workers' compensation Estimate — some states let owner-officers elect out −$350
Net annual savings $3,316

See the line-by-line breakdown

Where every dollar comes from and goes — plus your modeled salary and your exact break-even number.

We'll send the numbers to your inbox. No list swaps, no drip you can't leave.

Adjust the assumptions

Your break-even is a starting point, not the answer.

Reasonable compensation is facts and circumstances — for a Direct Care physician it's the number that decides whether this works. We set it defensibly, then build the rest of the plan around it. Across 70 tax plans we've identified $3.16M in tax savings for Direct Care practices.

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What this does and doesn't include

  • Payroll taxes only. This compares self-employment tax against S-Corp payroll tax plus the added cost of running one. It does not model income tax.
  • QBI, state tax, and retirement plans move the number. Paying yourself W-2 wages shrinks the 199A qualified business income deduction, some states tax S-Corps directly, and a solo 401(k) or defined benefit plan can change the math entirely. We model all three in a strategy session.
  • Salary is modeled, not determined. We estimate a reasonable W-2 salary from your net income — roughly 60% at lower profit, gliding toward 40% at higher profit. Your actual reasonable compensation depends on your role, hours, and market.
  • 2026 figures. Social Security wage base $184,500; SE tax 15.3% on 92.35% of net earnings; 0.9% additional Medicare above $200,000 single / $250,000 joint.
  • Estimates for planning only — not tax advice, and not a substitute for an engagement with a CPA.