The White Coat Investor

What is the ideal amount we should pay ourselves to minimize our taxes? For every dollar we pay in wages, our QBI goes down and our Medicare tax bill goes up, but our deduction goes up. Our marginal tax rate is going to be somewhere around 42%. So if we paid ourselves $300K, we'd have a QBI of $1.2M and a Medicare tax bill of $8,700. Our deduction would be the lesser of $240K or $150K. After applying our marginal tax rate, the deduction would be worth $63,000, for a savings of $56,127 (remember part of the Medicare tax is a deduction). What would happen if we paid ourselves $500K instead? The QBI would drop to $1M and the Medicare tax bill would rise to $14,500. So the deduction would be the lesser of $200K or $250K. Our wages are now clearly too high, since we're limited by the 20% of QBI rule and paid those extra Medicare taxes for nothing. The optimal answer is somewhere between $300K and $500K. I'm sure a better mathematician than I could write an equation to sort this out. But let's try $400K.