Tax planning for a medical practice does not have to be slow. You can often cut thousands from your current year tax bill in a matter of weeks if you focus on the right areas: entity structure, retirement plans, how you pay yourself, and how your practice tracks expenses. That is really what people mean when they talk about Medical practice tax planning with immediate results. It is less about some secret trick and more about tightening what you already do, using rules that exist today, not someday.
If you are a woman running a medical, dental, or therapy practice, you are probably juggling patients, staff, family, and emails that never end. Taxes sit in the background like a loud hum. You know it is there, you know it is draining money, but there is rarely time to sit and ask, “What can I fix right now?”
Let me walk through that. Slowly, but with real numbers and clear steps you can act on this year, not after you retire.
Why women in medicine often overpay taxes
I will say something a bit blunt. A lot of women in medicine under-negotiate and over-comply.
You follow the rules, you are careful, and you rarely push. That is good clinically. For taxes, it often means:
– You accept the default entity your first accountant suggested.
– You do not question payroll vs distributions.
– You wait for your CPA to “handle it” instead of setting targets.
I do not mean this as criticism. I have seen the same pattern in men too. But with women, there is sometimes an extra layer of guilt around money. Asking for lower taxes can feel almost selfish.
It is not.
Money you save legally in taxes is money you can put toward childcare, paying off loans, or easing your clinic schedule so you can breathe.
Tax planning is not about being greedy. It is about not tipping every time you talk to the IRS.
First lever: your business structure and how you pay yourself
The fastest wins often come from adjusting your entity structure and compensation. This sounds dry, but stay with me. It can be the difference between paying tax on 400,000 of income vs 250,000 of income for Social Security and Medicare purposes.
Check: are you using the right entity right now?
Many practices start as:
– Sole proprietorship
– Single member LLC
– Partnership
– S-Corp
– PLLC taxed as one of the above
If your practice is making more than about 250,000 to 300,000 per year in profit, and you are still a sole proprietor or simple LLC, there is a good chance you are overpaying self-employment taxes.
With an S-Corp (or LLC taxed as S-Corp), you can split what you make into:
– Reasonable salary, taxed with payroll taxes
– Distributions, not hit by self-employment tax
Here is a very simple comparison. Numbers are rough and do not include income tax, just self-employment or payroll type taxes.
| Scenario | Practice profit | How you pay yourself | Self-employment / payroll tax hit |
|---|---|---|---|
| Sole proprietor / plain LLC | 300,000 | All treated as self-employment income | About 42,000+ |
| S-Corp structure | 300,000 | Salary 180,000 + distribution 120,000 | Payroll tax on 180,000 only, savings around 10,000 to 15,000 |
Is it always that clean? No. You need a “reasonable” salary based on your specialty and region. But many physicians, dentists, and NPs are paying full self-employment tax on amounts that could legally be distributions.
If your practice has six figure profit and nobody has talked to you about S-Corp level planning, there is a gap in your tax planning.
What you can change this year
You do not need to wait for next January.
Here are moves that can bring results in the same tax year:
- Elect S-Corp status for your LLC, if still within IRS deadlines or with late election relief.
- Adjust your salary level to better match “reasonable compensation” instead of guesswork.
- Shift part of your income from salary to distributions once the entity is in place.
These are not theoretical tweaks. They affect every paycheck you run.
Second lever: retirement plans designed for high earners
Most women in medicine do not realize how much they can put away pre-tax. I sometimes ask clients, “How much do you think you can defer this year?” The common answer is 20,000 or maybe 30,000.
The real answer can be much higher, especially once you have control over the practice retirement plan.
Here are some typical ranges, assuming profits and cash flow can support them:
| Plan type | Ballpark annual pre-tax contribution limit (per owner) |
|---|---|
| Solo 401(k) (no employees) | Up to around 69,000 depending on age and income |
| Traditional 401(k) with profit sharing | Often up to 69,000 combined employee + employer |
| Cash balance / defined benefit plan | Frequently between 100,000 and 300,000+ for older high earners |
Now, does that mean you should push everything into retirement? Not always. There is a tradeoff between tax savings today and flexibility. You may want a mix of:
– Pre-tax retirement
– Roth accounts
– Taxable investments
– Cash for family and practice needs
But retirement plans can give “immediate” results in the sense that contributions this year reduce this year’s taxable income.
Common retirement plan mistakes in medical practices
You might recognize some of these:
- Leaving money in a basic SIMPLE IRA or SEP long after the practice is large enough for a 401(k) or cash balance plan.
- Ignoring your own contribution limits while making sure every staff member is taken care of.
- Not revisiting plan design as your profit level changes.
If you are a woman practice owner, there is another layer. You might be more concerned about staff fairness. That is valid. Just remember:
You are allowed to design a plan that supports your team and also reflects the risk you carry as the owner and clinician.
A good retirement plan design can do both.
Third lever: smart use of deductions you already qualify for
Many practices bleed money through sloppy deduction tracking, not through lack of available deductions. Here are areas where women in medical practice often leave money on the table.
Home office and remote work
If you are reviewing charts from home, doing telehealth, or managing patient messages at your dining table, part of your home may qualify as a home office. Many physicians skip this out of fear.
The rules are:
– It needs to be used regularly and exclusively for business work.
– It should be your principal place of business or a place where you meet patients or manage your practice.
Is the risk as high as people think? Not really, if you are honest and document.
You can use:
– Simplified method based on square footage
– Actual expense method where you track utilities, rent, mortgage interest, etc.
The home office can also tie travel from home to other work locations to business rather than commuting in some cases. That part can be tricky, so you want guidance, but it can matter.
Business use of car
If you travel between locations, hospitals, or nursing homes, your car is a business tool part of the time.
Two methods:
– Standard mileage rate
– Actual expense method
Most solo or small practice owners use standard mileage because it is easy. The key is to keep some kind of log. It does not have to be perfect, just honest and consistent:
– A simple app
– Google calendar plus a spreadsheet
– Monthly notes
Women often understate their mileage because they do not want to “push it.” I understand the instinct. Still, if you drove to three nursing homes and back, that was not personal.
Professional development and licenses
Board review, CMEs, journals, conferences, licensing fees, medical society dues. These add up fast.
Some doctors pay for these personally instead of through the practice. If you are the owner, think about which expenses should truly be on the business books.
Another thing. If you combine a family trip with a conference, you cannot deduct the personal portion like family airfare or extra vacation days. But your own conference registration, and your share of hotel for the business days, can still be valid deductions.
Again, you need reasonable documentation:
– Conference agenda
– Receipts
– Notes on which days were business vs personal
Fourth lever: income shifting within your family
This part can feel uncomfortable. Especially for women, because caring for family and paying children or spouses can get emotionally tangled.
Still, the tax code allows some ways to share income.
Paying your spouse
If your spouse does real work for the practice, you can pay them a salary:
– Bookkeeping
– Office management
– Social media and marketing
– IT and systems support
The payment has to be:
– For actual work
– At a market-based rate, not token or extreme
This can move income into a lower tax bracket if your spouse earns less.
There are tradeoffs:
– Payroll taxes on their pay
– Retirement plan contributions might now be due for them
– Health insurance planning could shift
This is why you do not just move money around blindly. But used wisely, it can help.
Paying your children legitimately
Older children who do real work:
– Filing
– Website content prep (with supervision)
– Cleaning tasks
– Patient survey follow ups
– Running errands that are actually business errands
If your child is old enough and truly working, they can be paid through payroll.
Why this matters:
– Your child may pay tax at a low or zero rate.
– The business gets a deduction at your higher rate.
– The earnings can fund a Roth IRA for them, which is quite powerful over decades.
You do have to follow child labor laws and keep clear records. No, your 3 year old is not the “chief marketing officer.”
Fifth lever: expense timing and cash flow planning
Some tax changes are about when you pay, not just what you pay.
If your practice is on the cash method of accounting, which many smaller practices are, then:
– Money you receive is income when you receive it.
– Money you pay is a deduction when you pay it.
You can sometimes bring expenses forward or push income slightly back within legal limits.
Examples of timing moves that can help this year
- Prepay certain expenses late in the year for items you know you will use soon, like supplies.
- Schedule needed equipment purchases in a year with higher income if you plan to use bonus depreciation or Section 179.
- Review large invoices and see if payment timing can help smooth out a spike in taxable income.
These are not magic. They do not erase tax, they shift it between years. But shifting can matter if:
– One year is unusually high income
– You are planning maternity leave or a lighter clinical schedule next year
– You are about to add a partner or merge
Women often plan family and career in cycles. Tax timing can support that instead of leaving you with a crushing bill in a peak year.
Sixth lever: health related accounts and benefits
You are in healthcare, so this part is obvious in theory, but not always in practice.
Health Savings Accounts (HSA)
If you have a high deductible health plan that qualifies, an HSA can be one of the most tax friendly accounts available:
– Contributions are pre-tax or tax deductible.
– Growth is tax deferred.
– Qualified withdrawals for medical costs are tax free.
Families with ongoing medical costs, fertility treatments, or mental health care may see HSAs as just a holding tank for near term expenses. That is fine, but any amount you can leave in the HSA invested for later can create long term tax advantage.
Section 105 or similar medical reimbursement plans
In some practice structures, especially if your spouse works in the practice, tailored health reimbursement plans can allow the business to reimburse certain medical costs for your family.
These arrangements need careful design. If done incorrectly, they can trigger problems. If done correctly, they shift costs from personal to business.
This is an area where you really want someone who understands both small practice tax and medical benefit rules. The gain can be large, but so can the mess if done casually.
Women specific issues: burnout, emotional load, and money shame
I will step away from the math for a moment.
Many women in medicine carry a quiet story about money:
– “I am not good with finances.”
– “I am a doctor, I should just focus on patients.”
– “I feel guilty earning more than some family members.”
Those stories can shape tax choices.
You may defer to a spouse, a partner, or even a hurried CPA. You may sign a return without really understanding why the tax is what it is.
The strange part is that medical decision making is often more complex than tax planning. You handle far more subtle situations every week in clinic.
What if you treat tax planning like patient care?
– You gather data.
– You ask clear questions.
– You seek second opinions when something feels off.
– You adjust over time based on new information.
You do not need to “love” taxes. You only need to care enough about your own life to make sure taxes are not calling the shots.
Sometimes the first “immediate result” from tax planning is not a lower bill, but a sense of clarity. You know where your money is going, and why.
What “immediate results” really looks like in real life
Let me describe a typical path I have seen with women practice owners. It is not perfect, but it is fairly common.
Year 1: clean up and quick wins
– Switch from sole proprietor to S-Corp or similar when appropriate.
– Adjust salary versus distributions.
– Start or upgrade a retirement plan.
– Fix obvious deduction miss, like home office or CME handled privately instead of through the practice.
Tax savings in year one can be substantial. Sometimes 10,000 to 50,000 or more, depending on the size of the practice and how messy things were.
Year 2 to 3: deeper structure
– Add a cash balance plan if income supports it.
– Fine tune practice benefits for staff and for the owner.
– Refine family income strategies if that fits your life.
– Improve bookkeeping so you actually have data to plan with.
At this stage, the practice feels more stable. Less chaos. You know roughly what to expect at tax time.
Year 4 and beyond: alignment with life goals
Here is where planning meets personal choice:
– Do you want fewer clinic days?
– Do you want to retire earlier?
– Do you want to fund college heavily?
– Do you want the flexibility to step back for caregiving?
Tax planning supports these decisions through cash flow, not the other way around.
The irony is that many high earning women wait too long to reach this stage, because they think they first need “more time” or “more financial knowledge.” Often they already have enough of both, they just have not had a neutral place to look at numbers without judgment.
How to talk to your current CPA without feeling dismissed
You might be reading this thinking, “My accountant never brings this up.” Before you fire anyone, try a focused conversation.
Here are questions you can ask directly:
- “At my current profit level, is S-Corp the right structure or should we revisit that?”
- “What is the maximum I can contribute to retirement this year, through all plans combined?”
- “Am I taking advantage of the home office rules given how much charting I do from home?”
- “Can you walk me through my top three deductions by size so I understand them?”
- “If my income changes next year because I reduce clinic days, what should we adjust to avoid surprises?”
If the answers are vague, rushed, or condescending, that is data. Women sometimes stay with unhelpful advisors longer than men do, because they do not want to be “difficult.” Try not to fall into that.
Bringing it together with a simple example
Let us imagine Dr. Lee, a woman in her late 30s, running a small internal medicine practice.
– Profit before owner pay: 450,000
– Current structure: LLC taxed as sole proprietor
– Retirement: SEP IRA with 20,000 contribution last year
– Family: Married, two kids under 10
Her changes could look like this:
| Area | Before | After | Likely effect |
|---|---|---|---|
| Entity & pay | All income as self-employment | S-Corp, salary 260,000 + distribution 190,000 | Reduce self-employment tax by perhaps 12,000-18,000 per year |
| Retirement | SEP 20,000 | 401(k) plus profit sharing, total around 69,000 | Lower taxable income by extra 49,000, which can save around 15,000+ depending on bracket |
| Deductions | No home office, irregular mileage tracking | Home office claimed, mileage tracked, CME routed through practice | Maybe 5,000 to 10,000 more in valid deductions |
Result: She could easily be keeping 25,000 to 40,000 more per year, with changes she can start within months, not years.
Is this every case? No. Some will be smaller, some larger. But it gives you a sense of the scale.
Questions women in medical practice often ask about tax planning
Q: I feel behind with taxes and money. Is it too late to fix this?
A: It is not too late. You cannot change closed years much, unless there were obvious errors, but you can change the rest of your working life. Even five years of better planning can add up to hundreds of thousands of dollars kept in your world instead of the governments.
Q: I am worried aggressive tax strategies will trigger an audit. Should I just keep things simple?
A: You should keep things honest and documented. There is a difference between aggressive and smart. Most of the moves in this article, like entity selection, retirement plans, and business expense tracking, are standard and widely used. If a strategy sounds too cute or hard to explain in plain language, then it might be too aggressive. But claiming a home office you truly use or paying yourself a reasoned S-Corp salary is not “pushing it,” it is using the rules correctly.
Q: My spouse or partner handles the money and I feel out of the loop. Where do I start?
A: Start by asking to see three things: your last tax return, a simple profit and loss statement for the practice, and your retirement account statements. Then block one hour during a quiet time and read them slowly. Write down any questions. Even if you feel lost at first, patterns will start to appear. You do not need to wrestle control, but you deserve a clear seat at the table.
Q: How soon should I expect to see real savings if I change my structure or retirement plan?
A: Many changes show up within the same tax year. Adjusting payroll and retirement contributions can affect your next few pay periods. Entity changes can shape the next return. Some steps, like adding a cash balance plan, take longer to design, but you can still often put them in place for the current or next tax year. The key is starting early enough in the year to have options rather than scrambling in March or April.
What is one small tax change you can make in your practice this month that your future self will be grateful for?