SSTB status and 199A
Medical practices are Specified Service Trades or Businesses (SSTBs) under Section 199A, which means the 20% QBI deduction phases out above $241,950 single / $483,900 MFJ for 2025. Structuring around the phase-out matters for partner-owners. Retirement contributions and income timing are the practical levers, since they reduce taxable income toward the threshold rather than trying to argue the practice out of SSTB status.
Retirement plan design
High-income practices benefit from layered retirement plans: 401(k) with employer match, profit sharing, and cash balance plan stacked. The total contribution can exceed $300,000 per high-income partner in the right structure. The design has to pass nondiscrimination testing across the practice's staff, so plan decisions and staffing decisions interact more than most owners expect.
Partner compensation
Guaranteed payments, eat-what-you-kill, and hybrid structures each have different tax and partnership accounting mechanics. We help practice groups evaluate and document compensation agreements. Undocumented side arrangements between partners are where partnership returns go wrong and where buy-ins get contentious.
Associates, per-diem clinicians, and payroll
A physician or nurse practitioner who works your schedule, in your space, on your patients is very hard to defend as an independent contractor. Misclassified associates create payroll tax exposure and retirement-plan testing problems at the same time. Where 1099 status is legitimate (true locum work through an agency, independent call coverage), the file should show it.
Equipment, build-outs, and the office lease
Imaging equipment, chairs, and clinical technology run through Section 179 and bonus depreciation, while leasehold improvements follow their own recovery rules. Florida adds two local wrinkles worth budgeting for:
- Sales tax on the commercial office lease, a line many practices moving from out of state don't expect
- County tangible personal property tax on equipment and furnishings
- Depreciation method choices that interact with the QBI phase-out year by year
Books that survive a practice sale
Practice acquirers and their lenders re-underwrite the numbers. Monthly books that tie to bank statements, clean owner-compensation history, and a defensible split between personal and practice expenses directly affect valuation and how much of the price survives due diligence.
Common questions
- Should a solo physician form an S-corp or a PLLC?
- Usually PLLC electing S-corp taxation. The PLLC gives the required legal structure; the S-election captures the payroll-tax savings.
- Can we pay our associates on a 1099?
- Usually not defensibly. If the practice controls the schedule, the location, and the patients, the associate is an employee. True independent arrangements exist, but they need to look independent in fact, not just in the contract.
- Is a cash balance plan worth the administration cost?
- For owners well past the 401(k) limits and with steady practice income, usually yes. The actuarial and testing fees are real, but they're small next to the deduction a properly designed plan creates.
- How is the sale of a practice taxed?
- It depends on how the price is allocated among equipment, goodwill, and any consulting or non-compete payments. Each piece carries different rates and timing, so the allocation is negotiated, not an afterthought.
Related
Corporation & Partnership Tax Returns
Forms 1120, 1120-S, and 1065 preparation for corporations, S-corps, and partnerships, plus owner K-1s, shareholder basis tracking, and multi-state filings.
Business Tax Planning
S-corp reasonable salary analysis, entity elections, retirement plan structuring, and Section 179 and bonus depreciation planning for small business owners.
Small Business Payroll
Quarterly and annual payroll filings: Forms 940, 941, UCT-6, W-2, and 1099. We calculate, file, and make the tax deposits so owners can focus on growth.
More industries we serve
Tax & Accounting for Real Estate Investors
Depreciation, cost segregation, 1031 exchanges, short-term rental rules, Real Estate Professional status, and passive activity loss limits for investors.
Tax & Accounting for Consultants & Freelancers
Schedule C vs S-corp, home office deductions, self-employment tax, quarterly estimates, and Solo 401(k) retirement plans for consultants and freelancers.
Tax & Accounting for Content Creators
1099-NEC and 1099-K platform income, brand deals, gifted products at fair market value, home studio deductions, and multi-state sponsorship income for creators.
Tax & Accounting for Gig Economy Workers
Tax help for Uber, Lyft, DoorDash, and Instacart drivers: standard mileage deduction, phone and platform fees, Schedule C, and quarterly estimated payments.