Specified service business
Health services income loses the QBI deduction above the income threshold.
Industry tax guide
Medical and dental practices tax and accounting
Tax planning for practices that invest in equipment and people.
Medical and dental practices combine high professional income with heavy spending on equipment, build-outs and staff. Many owners also buy into or acquire practices during their careers.
The tax issues are the service-business limits on the QBI deduction, timing equipment purchases, structuring practice acquisitions and using retirement plans to shelter income.
Compared with a general business
What makes taxes different for medical and dental practices
Expensive equipment
Imaging, chairs and lasers make depreciation planning central.
Practice purchases
Buying or selling a practice requires allocating price among equipment, records and goodwill.
Provider compensation
Associate pay, production bonuses and partner draws shape payroll and owner taxes.
The rules in detail
Tax rules for medical and dental practices
Health is a specified service business
Physicians and dentists above the income threshold lose the 20% qualified business income deduction on practice income, which makes entity structure, salary and retirement plan design the main planning tools.
Equipment and build-outs
Imaging, chairs, lasers and other equipment qualify for Section 179 or 100% bonus depreciation. Interior office improvements are 15-year qualified improvement property and also eligible for bonus depreciation.
Buying a practice
In an asset purchase, the price is allocated among equipment, patient records and goodwill on Form 8594. Goodwill and other intangibles are amortized over 15 years, while equipment can often be deducted much faster.
Planning moves
Ways to save tax in medical and dental practices
Cash balance plans
Physicians and dentists can contribute well beyond 401(k) limits.
Section 179 and bonus depreciation
Equipment deducted in the year that saves most.
S-Corp salary planning
Reasonable salary plus distributions reduces payroll tax.
Structure practice acquisitions as asset purchases
Equipment and goodwill become deductible over time.
Make the PTET election
State tax deducted at the entity level.
Own the building separately
Leasing your building to the practice can support retirement and succession planning.
Working with OICPA
How we help
Plan equipment purchases
Section 179 and bonus depreciation timed to the year with the highest bracket.
Business Tax AdvisoryPayroll for clinical and front-office staff
Payroll, benefits and state filings for associates and staff.
Payroll ServicesStructure a practice acquisition
Purchase price allocation and entity choice reviewed before you sign.
M&A Due Diligence SupportPlan the year
Income projections and retirement contributions set before year-end.
Business Tax PlanningBookkeeping and reporting
The accounting behind the tax work
Clinical excellence does not automatically translate into clean economics. Between provider compensation models, equipment finance, and payer timing, practices need accounting that reflects how care is delivered, not only how deposits hit the bank.
Production vs. collections vs. cash
Provider comp formulas often depend on production, while tax and debt service follow cash. Misaligned reporting fuels partner disputes and surprises when estimates come due.
Equipment and tenant improvement decisions
Section 179 and bonus depreciation interact with loan schedules and practice transitions. Poor timing can accelerate deductions when cash is tight, or defer value when you need it most.
Group practice governance
Adding associates or merging locations changes overhead allocation, buy-in mechanics, and compliance workflows. Without a documented financial model, strategic moves become emotionally charged.
What you can expect
- Practice dashboard: production, collections, AR aging, and overhead trends
- Quarterly tax and distribution guidance aligned to partner agreements
- Transaction support memos for equipment purchases, remodels, or practice combinations
Frequently asked questions
Can I still get the QBI deduction as a physician?
Below the income threshold, yes. Above the phase-out range it is lost for health services income, so we plan around that threshold.
Should I buy a practice's assets or its stock?
Buyers usually prefer assets, because equipment and goodwill can be depreciated or amortized. Sellers often prefer stock. The allocation and price are negotiated together.
Can I deduct a new CBCT or imaging system in one year?
Usually, through Section 179 or 100% bonus depreciation. Whether to take it all in year one depends on your income this year and next.
Related articles
References
- 26 U.S. Code § 199A: Qualified business incomeLegal Information Institute, Cornell Law School
- 26 U.S. Code § 197: Amortization of goodwill and certain other intangiblesLegal Information Institute, Cornell Law School
- About Form 8594, Asset Acquisition Statement Under Section 1060Internal Revenue Service
- Publication 946 (2025), How To Depreciate PropertyInternal Revenue Service
Rules reflect federal tax law as of November 2026.