- Mixing W-2 and 1099 income complicates taxes—specialized CPAs cut six figures in over-withholding.
- Section 179, bonus depreciation and cash-balance plans are the three biggest doctor tax levers.
- Start vetting medical CPAs 6-12 months before buying new equipment or changing practice structure.
Physicians earn high W-2 wages plus 1099 moonlighting income, often across state lines.
The IRS notice-letter rate for doctors runs 1.8 × the national average (Medscape Physician Compensation Report 2024). Choosing anaccountantwho speaks “medical��� can save six figures a year.
Compare vetted physician-focusedCPAs on Sam’s List!
Written by Kimi, Co-founder, Sam’s List
Why Doctor Finances Are Different
• Multiple entities (PC, PLLC) and moonlighting 1099s
• High malpractice premiums demand unique deductions
• Large equipment purchases depreciate fast
• State non-competes drive practice-buy-in timing
Five Critical Services Your CPA Should Provide
1. Entity & Reasonable-Salary Mix
- S-corp owners must set “reasonable compensation” that survives IRS scrutiny (3121).
- Example: A Solo Orthopedist, cut payroll taxes $28K by lowering W-2 pay to $195K and taking the rest as distributions—well within IRS safe harbor.
2. Section 179 & Bonus Depreciation for Equipment
- 2025 bonus drops to 60 % (IRC168(k)); timing purchase matters.
- Example: Using IRS Pub 946, a dentist wrote off $240K and hired a hygienist with the cash-flow boost.
3. 199A Deduction for Group Practices
- Professional-service income phases out at $232 K single / $464 K joint (2025).
- Example: A three-doctor ENT practice split ancillary-service revenue into a management LLC, preserving the 20% deduction.
4. Defined-Benefit or Cash-Balance Plans
- At $500 K+ earnings, a cash-balance plan allows $200K pre-tax contributions (IRS Notice 2014-5).
- Example: A doctor used the plan to fund a taxable brokerage DCA strategy after maxing the plan shelter.
5. Multi-State & Foreign Income Compliance
- Traveling surgeons trigger NY “convenience of employer” tax and CA sourcing rules (NY TAM 16-5).
- Example: Quarterly withholding prevents April surprises.
Red Flags
• “We treat medical the same as any small business.”
• No malpractice-premium analysis.
• Ignores Medicare cost-report overlaps.
Readiness Checklist
☐ Separate entity for 1099 income
☐ Equipment schedule aligned with bonus-depreciation phase-out
☐ Cash-balance feasibility study complete
☐ Multi-state estimated taxes set
FAQ
Should I choose cash or accrual accounting as a physician?
Most solo practices benefit from cash until revenue hits $5 M (IRC 448).
What retirement plan shelters the most income for doctors?
Cash-balance plans allow $100K–$300K annual contributions, far above 401(k) limits.
Are malpractice premiums 100 % deductible?
Yes—ordinary and necessary business expense (IRC 162).
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Author: Kimi, Co-founder of Sam's List
Kimi writes about what she's learning while building Sam's List and shares honest takeaways from her conversations with accountants and financial advisors across the country. None of this is financial advice—just the stuff most people wish someone told them sooner.
