Year-end tax planning is the work you do before December 31 to change how much you owe in taxes in April. For a high-earning physician, five year-end moves tend to make the biggest difference. You can review your entity structure, fill your retirement accounts, time equipment purchases, route side income through the right structure, and set up protective structures early.
A great CPA is a real asset, so it makes sense that many physicians feel their taxes are handled. But a CPA’s main job is usually filing an accurate return, and that work happens during tax season, after the tax year has already closed. Planning works best before that point, and several of the options in this article have a December 31 deadline.
Want to know which of these five apply to your situation? Schedule a free consultation with Legally Mine and find out while there is still time to act.
Why Does the December 31 Deadline Matter?
Most year-end tax strategies only work if they are in place by December 31. Tax preparation looks backward. It takes the year you already lived and reports what you owe. Year-end tax planning looks forward, and it only works while the year is still in progress.
Consider two illustrative physicians, each earning $650,000 through a practice they own. The first meets with a strategist in October. That physician places a new imaging unit in service on December 18, so the deduction counts for this year. They also set up a separate entity before the fourth-quarter consulting checks arrive and file an S-Corp election that takes effect January 1.
The second physician waits until April, when their CPA starts the return. By then, it is too late to deduct new equipment for the prior year, and the consulting income has already landed in a personal account. The mid-March deadline to elect S-Corp status for the new year has also passed, so in most cases that election waits until the following year.
The second physician still has a few options that survive the calendar, such as certain retirement contributions, covered near the end of this article. Both physicians earn the same income. The only difference is when they started, which is why year-end tax planning belongs in the fourth quarter, not the first.
Legally Mine is not a CPA firm and does not file returns. We help set up the business structures that make these tax planning strategies possible, and we work alongside your existing CPA rather than replacing them.
Strategy 1: Review Your Entity Before It Costs You Another Year
Your entity is the legal form your practice operates under, and it affects nearly every other move in this article. Many tax reduction strategies only work for a business set up to use them. A physician operating as a sole proprietor or a single-member LLC that hasn’t chosen a different tax treatment pays self-employment tax on their net profit, on top of income tax. That tax is 15.3% on the first $184,500 of earnings in 2026, plus Medicare tax on everything above that. Nothing about this setup is illegal or unusual, but it can cost more than it needs to.
Right now the section explains the problem but stops before the solution. Is there more to this section, like the S-Corp explanation and timing?
The S-Corp Election and Reasonable Salary
An S corporation election splits practice income into two parts. The first is a reasonable salary that runs through payroll and carries Social Security and Medicare taxes. The second is a distribution, which generally does not. The salary has to be defensible for your specialty, hours, and market.
The IRS enforces the reasonable salary requirement. Its guidance on S corporation compensation makes clear the agency can reclassify distributions as wages. It also notes that when most of a business’s income comes from the owner’s own services, the IRS expects most of that income to be treated as salary. That describes many physician-owned practices, which is why a practice paying a $60,000 salary on $600,000 of profit is likely to draw scrutiny. We compare the options in LLC vs. S Corp vs. C Corp for medical professionals.
Timing matters just as much. Under the IRS instructions for Form 2553, an S-Corp election generally has to be filed within two months and 15 days after the tax year starts. It can also be filed any time during the year before.
File in November, and you are electing for next year. File in late March, and you have generally missed the current one.
Where the QBI Deduction Actually Lands for Physicians
This is the point many year-end tax articles miss. The qualified business income (QBI) deduction lets many business owners deduct up to 20% of their business income, and the 2025 tax law made it permanent. But the tax code places medicine in a category called a specified service trade or business. That category also includes fields like law, accounting, and consulting, and it limits the deduction for high earners.
For 2026, the deduction starts phasing out at $403,500 of taxable income for married couples filing jointly. It disappears completely above $553,500, based on the inflation adjustments the IRS published in Revenue Procedure 2025-32.
Many physicians reading this are above that line, so their practice income gets no QBI deduction at all. If a tax plan counts on QBI for that income, it is counting on a deduction you likely cannot take. The deduction can still matter for a lower-earning spouse’s business or a non-service side business, so it is worth raising with your tax advisor.
Not sure whether your current entity is helping or just costing you payroll tax? Book a structure review with Legally Mine before year-end paperwork deadlines close.
Strategy 2: Fill the Retirement Stack, Not Just the 401(k)
Retirement contributions are the least exciting part of year-end tax planning, and often the largest. Most physicians max out their employee deferral, which is the amount they contribute to a 401(k) from their own paycheck, and stop there. For 2026 that amount is $24,500, per IRS Notice 2025-67. That is nowhere near the ceiling.
Catch-up contributions add room as you age: $8,000 at 50 and older, or $11,250 for ages 60 through 63. One change starts in 2026. If your 2025 wages from that employer were over $150,000, your catch-up contributions generally have to go in as Roth. Roth contributions are taxed now, so they do not lower this year’s taxable income.
The Numbers Above the Deferral Limit
The total limit for everything that goes into a 401(k)-style plan in 2026 is $72,000. That total includes your own contributions plus employer contributions and profit sharing. A practice owner with the right plan design and entity can reach it. For 2026, contributions are calculated on up to $360,000 of compensation.
Above that sits the defined benefit tier. A cash balance plan is a type of pension that shows each person an account balance, much like a 401(k). For 2026 it can support an annual benefit of up to $290,000.
For an older, high-earning practice owner, contributions in the low-to-mid six figures may be possible in a single year. The exact amount depends on age, income, and plan design. Your CPA and an actuary run those numbers, and we explain how these plans fit together in Beyond the 401(k).
A cash balance plan belongs in a fall conversation, even though its deadline is not December 31. Since the SECURE Act of 2019, a business can adopt one as late as its tax return due date, including extensions, and have it count for the prior year. The reason to start now is that plan design and funding take time. The money also has to be deposited within eight and a half months after the plan year ends.
A practice with employees that starts a new plan may also qualify for a tax credit for part of the setup costs. Unlike a deduction, a tax credit reduces the tax you owe dollar for dollar.
The Account Most Physicians Underuse
A health savings account (HSA) is one of the few accounts that is tax deductible going in, grows tax free, and comes out tax free for qualified medical expenses. You can contribute only if you are covered by a high-deductible health plan. For 2026 the limits are $4,400 for self-only coverage and $8,750 for family coverage, plus $1,000 more at 55 or older, under Revenue Procedure 2025-19.
Those amounts are small compared with your income. But the account can grow for decades if you pay current medical costs out of pocket and leave the HSA invested.
Strategy 3: Place Equipment in Service Before the Year Closes
Equipment timing has become one of the strongest tax reduction strategies for a practice owner, because federal tax laws changed in 2025.
Section 179 lets you deduct the full cost of qualifying equipment in the year you place it in service, instead of spreading the deduction over several years. For 2026 the limit is $2,560,000. The limit shrinks dollar for dollar once you place more than $4,090,000 of property in service in a year.
The 2025 tax law roughly doubled that limit. It also made 100% bonus depreciation permanent, reversing a phase-down that was set to reach zero. Bonus depreciation is a separate rule that also lets you deduct the full cost of qualifying property in the first year.
Two details decide whether this works for you:
- Placed in service, not purchased. Equipment sitting in a crate on December 30 does not count. As IRS Publication 946 explains, it has to be ready and available for its intended use before the year closes.
- Cash flow comes first. A large deduction that strains your operating account in the first quarter is not a win. Buy what the practice needs, when it needs it, and let the timing work in your favor.
Cost Segregation If You Own the Building
If your practice owns its building, ask your CPA about a cost segregation study. A commercial building is normally depreciated over 39 years, according to IRS Publication 946. A cost segregation study, done by engineers, identifies parts of the building with much shorter lives, such as specialized medical plumbing, clinical electrical, and cabinetry. That can move a meaningful share of the deduction into the first year.
Legally Mine does not perform cost segregation studies. We build the entity structure that makes the strategy usable. That usually means the building sits in a separate holding company that leases it to the practice. This separation is also the foundation of our asset protection work, so one structure serves both goals.
Strategy 4: Route Side Income Through a Structure Before It Lands
Hospital-employed physicians often assume a W-2 leaves nothing to plan around. That changes the moment any 1099 income shows up.
Locum tenens shifts, expert witness work, medical directorships, telehealth, speaking fees, consulting, a med spa, and rental property all count. Any of them makes you a business owner alongside your job. For a W-2 physician, side income is usually where the widest set of tax reduction strategies opens up. Working with your CPA, it can unlock:
- A solo 401(k) on top of your hospital plan. Your own contributions share one annual limit across both plans, but the solo plan has separate room for employer contributions.
- Deductible expenses a W-2 employee cannot take, such as a qualifying home office, continuing medical education travel tied to the side business, professional dues, and equipment.
- Liability separation, so a claim tied to your consulting work does not reach your personal assets directly.
The order matters more than the list. Income you have already received personally is hard to redirect. A structure set up in October covers the income that arrives in November and December. A structure set up in April does nothing for income that already arrived.
If you have 1099 income landing this quarter, now is the time for that conversation. Talk to Legally Mine about the right structure before the money reaches your personal account.
Strategy 5: Put Protective Structures in Place While the Year Is Still Quiet
For a physician, tax planning and liability planning go together, and year-end is a natural time to address both.
The American Medical Association’s April 2026 research on medical liability found that 28.7% of physicians had been sued at least once by 2024. The risk rises with time in practice. Among physicians 55 and older, 45.2% had faced a claim, compared with 11% of those under 45. The same research found liability insurance premiums have risen nationwide for seven years in a row.
The structures that reduce that exposure are the same ones that make the tax strategies above work. They include an operating entity for the clinical practice, separate entities that hold the building and equipment, and formal leases between them. That is the core of our lawsuit prevention work.
Timing matters even more here than it does with taxes. If you move assets after a claim is filed, or once you have real reason to expect one, a court can treat it as a fraudulent transfer and undo it. At that point nothing is protected, and the other side has a new argument.
We explain how that works in Can You Protect Assets After Being Sued? The short version is that the window closes without warning.
Estate planning follows the same logic. A living trust can keep the assets placed in it out of probate, the public court process that settles an estate. It is also easier to fund correctly when it is built alongside your entity work instead of added years later. Our estate planning work is designed to sit on top of that structure.
What Else Closes on December 31
Several smaller moves share the same December 31 deadline. They are easy to miss because they usually sit with your financial advisor rather than your CPA.
Capital Gain and Loss Timing
You control when you sell investments, and that timing changes how your investment income is taxed. Selling a position at a loss before December 31 lets the loss offset gains you realized during the year. This is usually called tax loss harvesting. Under IRS Topic No. 409, losses beyond your gains can offset up to $3,000 of ordinary income per year, and the rest carries forward.
The reverse can also make sense. If you expect to be in a higher tax bracket next year, selling at a gain this year may mean paying less capital gains tax. That decision belongs to your financial advisor and CPA, and it closes with the calendar.
Charitable Contribution Planning
If you give to charity anyway, how you give changes the tax benefit. Donating appreciated stock you have held more than a year is one option. As outlined in IRS Publication 526, you can generally deduct its full value without paying capital gains tax on the gain.
The rules for people who itemize instead of taking the standard deduction changed in 2026 under the 2025 tax law. Your charitable deduction now only counts giving above 0.5% of your adjusted gross income (AGI), so a physician with $650,000 of AGI gets no deduction on the first $3,250.
There is also a new cap for the top 37% bracket, which starts above $768,700 of taxable income for married couples filing jointly in 2026. For income in that bracket, each deducted dollar now saves 35 cents instead of 37.
These changes make bunching more useful. Bunching means grouping two or three years of donations into one tax year. Many people do this through a donor-advised fund, an account you contribute to now and use to grant money to charities over time.
Bunching clears the new floor once instead of every year. It can also lift your itemized deductions above the standard deduction, which is when itemizing starts to pay off. Both moves have to be completed before the year ends.
The Deadlines That Are Not December 31
Not everything closes with the calendar. Knowing the difference keeps you from rushing in December on something you have until spring to handle.
- Traditional IRA, Roth IRA, and HSA contributions generally run to the April filing deadline.
- SEP-IRA and solo 401(k) employer contributions generally run to your business tax return due date, including extensions.
- A new profit sharing, defined benefit, or cash balance plan can be adopted up to that same extended due date and count for the prior year. This is one of the few large moves that survives the calendar.
- Fourth-quarter estimated tax payments are due in January.
Two items do not get extra time. Your own 401(k) contributions from pay generally cannot be made after the year ends. Required minimum distributions generally have to be taken by December 31, and missing one carries a penalty. Confirm each deadline with your tax professional, because the answer depends on your entity type and filing status.
How to Run the Next 90 Days
Effective tax planning follows a sequence. Here is one that works if you are reading this in the fall:
- Pull your year-to-date profit and loss. Every one of these tax reduction strategies depends on knowing where your taxable income will actually land.
- Ask your CPA one question: “Given this projected income, what changes if my entity changes?” Their answer tells you whether Strategy 1 is worth pursuing.
- Check your retirement plan deadlines. Your own 401(k) contributions have to come out of pay before December 31. Employer-funded plans, including a cash balance plan, can be adopted later, up to your extended business return due date.
- Decide on equipment before Thanksgiving. Placed in service means installed and working, and December installation calendars fill up.
- Separate your higher-risk assets from your safer ones. This is the structural work, and it has to happen while no claim is pending.
None of this requires replacing your accountant. It means giving them a structure worth working with, and doing it before December 31.
Year-End Tax Planning FAQs
When is it too late to do year-end tax planning for the current year?
Most year-end strategies close on December 31, including placing equipment in service and making your own 401(k) contributions from pay. An S-Corp election made after roughly mid-March generally applies to the following year. IRA and HSA contributions and new employer-funded retirement plans can wait until the following year’s deadlines. You can see how that timing works on the Legally Mine tax planning page.
My CPA already handles my taxes. What would a tax strategist change?
Tax preparation and tax planning are different jobs. A CPA files an accurate return that reports your tax liability for a year that already happened. Planning changes what happens before the year closes, through entity structure, plan design, and timing. That is where much of a practice owner’s potential tax savings comes from.
The two roles work together. Legally Mine builds the structures, and your CPA works within them. We explain the difference in Your CPA Is a Compliance Officer, Not a Tax Strategist.
Does year-end tax planning help a hospital-employed physician on a W-2?
Yes, though the options are different. A physician with only W-2 income has limited ways to reduce federal income tax beyond retirement accounts and an HSA. Any 1099 income from locums, expert witness work, consulting, or telehealth makes you a business owner too. That can open up entity structuring, a solo 401(k), and business tax deductions that may lower your tax liability.
Set up the structure before the income arrives, not after. Schedule a consultation with Legally Mine to see which options fit your situation.
Start Before the Calendar Decides for You
Year-end tax planning rewards physicians who make decisions on a schedule. It does little for those who wait to react to a tax return in April. Most of the strategies above have a December 31 deadline, and once it passes, those options are gone for the year.
Legally Mine builds the entity and asset protection structures that make proactive tax strategy possible. We work alongside the CPA and financial advisor you already have. If your structure has not been reviewed since you formed it, a review before December 31 is a practical place to start.
Schedule your free consultation with Legally Mine and get your structure reviewed before December 31st.
Key Takeaways
Figures reflect IRS limits for the 2026 tax year.
- Equipment deduction limits went up. A practice can deduct up to $2,560,000 of qualifying equipment in the year it starts using it, and 100% bonus depreciation is now permanent. That makes equipment timing more valuable than it was in 2024.
- Retirement savings can go well past the 401(k). Many physicians stop at the $24,500 they contribute from their own paycheck. The limit for combined employee and employer contributions to a 401(k)-style plan is $72,000, and a cash balance plan can go higher.
- High-earning practice owners often get no QBI deduction. The tax code limits this deduction for medical practices. For married couples filing jointly, it starts shrinking above $403,500 of taxable income and is gone at $553,500.
- Side income opens more options than a raise does. A W-2 physician with even modest 1099 income is also self-employed and can claim business expenses a pure employee cannot.
- Structure has to exist before it is needed. Courts can undo asset transfers made to avoid a claim that already exists or is expected, and an S-Corp election made in February comes too late for the year that already ended.
Year-End Tax Planning FAQs
When is it too late for year-end tax planning?
For most strategies, the cutoff is December 31. That includes placing equipment in service and making your own 401(k) contributions from pay. An S-Corp election filed after mid-March generally applies to the following year. IRA contributions, HSA contributions, and new employer-funded retirement plans can wait until their deadlines in the following year. You can see how that timing works on the Legally Mine tax planning page.
Do I need a tax strategist if I already have a CPA?
A CPA and a tax strategist do different jobs, and they work best together. A CPA files an accurate return for a year that already happened. A strategist changes what happens before the year closes, through entity structure, plan design, and timing, which is where much of a practice owner’s potential tax savings comes from. We explain the difference in Your CPA Is a Compliance Officer, Not a Tax Strategist.
Does year-end tax planning help a hospital-employed physician on a W-2?
Yes, though the options are different. With only W-2 income, the main ways to lower federal income tax are retirement accounts and an HSA. Any 1099 income from locums, expert witness work, consulting, or telehealth also makes you self-employed. That can open up entity structuring, a solo 401(k), and business deductions, as long as the structure is in place before the income arrives.
Disclaimer
The information provided on this website does not constitute legal advice or tax advice. Customers of Legally Mine have no attorney-client privilege with representatives of Legally Mine, and no confidential relationship exists or will be formed by using its services. For personal legal or tax advice, please consult a licensed attorney or personal accountant.