Maximizing Tax Efficiency Through Strategic Compensation and Depreciation Planning

Dentist with S-Corp/W-2

income of $600,000

$145,590

ILLUSTRATIVE SAVINGS

The owner was earning strong income, but the tax picture was

being driven by a high W-2 wage level, limited planning windows,

and taxable income that had not been projected early enough.

What changed

Reviewed reasonable compensation against practice

economics and owner role.

Identified depreciation timing opportunities that could offset

current-year income.

Reframed the plan around tax projections instead of

after-the-fact filing.

EXPANDED SOLUTION

Solution: balance compensation,

deductions, and timing

For an S-Corp owner, the planning opportunity is not simply to lower wages. The work is to document a defensible compensation strategy, then coordinate deductions, depreciation, and cash-flow decisions before the year closes.

1. Reasonable compensation review

Compare salary to duties, production, industry benchmarks, and distributions so the owner is not

overpaying payroll tax while staying supportable.

2. Bonus depreciation modeling

Evaluate equipment, technology, and qualified assets already placed in service or planned before

year-end.

3. Accountable-plan cleanup

Move eligible business expenses into a reimbursable structure with documentation instead of leaving them as personal spending.

4. Tax projection cadence

Update projections before major purchases, payroll changes, or year-end so the owner sees the tax

impact while there is still time to act.