8 Tax Planning Strategies for Optometrists
Effective tax planning strategies for optometrists are key to continued growth and profitability. Staying one step ahead will help reduce your tax burden and allow you to invest in your future.
Most optometrists get professional help from tax experts. The advice they give you on topics like depreciation, your business model, and maximizing deductions will put you in good stead for a strong financial future.
1. Strategic Depreciation
Deciding how to depreciate your medical equipment is a key tax planning strategy for optometrists. Understanding the medical equipment depreciation rate is an important part of this. A professional in accounting for medical practices can advise on the method that best aligns with your long-term financial goals.
Opting for accelerated depreciation is an interesting tax strategy for practices that buy new equipment in their early years. The amount of depreciation taken each year using this method is higher during the first years of your asset’s useful life.
It’s advantageous during high-income years when reducing your taxable income is a priority. Remember that front-loading your tax deductions will leave you with fewer expenses to offset in later years.
Straight-line depreciation provides a more stable and predictable deduction every year. This is because it spreads the deductions evenly over the asset’s useful life. The stability of this method could be beneficial for long-term financial planning.
Consider Special Depreciation
Special depreciation allows medical practice owners to deduct 40 percent of the cost of equipment in the year they purchase it. This covers anything from the machines you use to the office furniture.
Be aware that this percentage will go down to 20 percent in 2026 and is currently scheduled to expire after 2026. Practitioners who are interested in this benefit should consider purchasing equipment sooner rather than later.
Opting for special depreciation means that you spread less of the cost over the following years. However, it could be a game-changing strategy for practices that need to free up short-term cash flow.
Leasing Equipment Also Offers Tax Benefits
Depreciation is an excellent tax planning tactic for optometrists who wish to purchase their equipment. However, it’s also worth exploring the tax advantages of leasing equipment. For example, leasing over several years spreads out the cost of sales tax.
2. Health Insurance Deductions and HSAs
S corp owners can deduct their health insurance premiums. However, reporting these deductions is complex and depends on your stake in the S corp. Always get professional help from an expert in tax planning to handle the payment and reporting of your premiums. This will ensure they qualify as deductible expenses.
Generally, health savings accounts (HSAs) offer three main tax advantages:
Any contributions are tax-deductible.
Growth on funds is tax free.
Withdrawals made to cover qualified medical expenses are also tax free.
Making contributions to your employees’ HSAs will also improve your practice’s benefits package. These initiatives boost employee retention and practice stability.
3. Consider S Corp Status
Becoming an S corp offers potential tax benefits for optometrists operating as sole proprietors or partnerships. Changing your business structure is one of the top ways to reduce taxable income in small businesses. S corps are “pass-through” entities that pass their income directly to their shareholders. This means your practice’s corporate profits aren’t subject to double taxation.
S corp status offers several benefits:
The owners’ salaries are separated from the practice’s profits and any debts or liabilities. This separation offers personal liability protection.
S corp status allows for strategic tax planning regarding distributions and compensation. The right choices could lower your tax liability. For example, compensating yourself using a smart combination of dividends and salary could reduce your self-employment tax liability. It will also create opportunities for wages-paid deductions. This reduces the amount of taxable corporate income.
Book an appointment with our team to see if a different business structure would save you money.
4. Qualified Business Income Deduction
The qualified business income (QBI) deduction offers pass-through entities a 20 percent deduction on their income. For example, a practice owner who makes $100,000 in pass-through income would only pay tax on $80,000 of that total.
You must operate as a pass-through entity to qualify for this deduction. These include S corps, partnerships, LLCs, and sole proprietorships.
5. Maximize Retirement Contributions
Contributing to your retirement accounts is a fundamental part of your personal and business financial planning. Making regular contributions throughout the year ensures you’re reducing your taxable income.
For 2025, the 401(k) contribution limit is $23,500. Over 50s can also make a further $7,500 catch-up contribution per year. The contribution limit in 2025 is $7,000 for Roth and Simple IRAs ($8,000 if you’re over 50).
6. Choose the Standard Deduction
The standard deduction amount has risen for 2025. The standard deduction amount for single filers in 2025 is $15,000. Married couples can claim up to $30,000.
This approach will simplify deductions for many taxpayers. However, it still requires careful planning to ensure you deduct everything you can. Ask a tax professional if the standard deduction is still the most favorable option for you.
7. Explore ADA Tax Credits
ADA tax credits offer tax-saving opportunities for businesses that make ADA adaptations. This could be for disabled employees or customers. There are three main tax credits worth exploring:
Work Opportunity Tax Credit
The work opportunity tax credit is open to optometrists who hire individuals from certain target groups. This includes disabled workers and veterans.
Employers can claim the following for employees who worked at least 400 hours:
40 percent of $6,000, or $2,400, of qualifying employees’ first year wages
40 percent of up to $24,000, or $ 9,600, of first-year wages for qualifying veterans
Employers can claim a 25 percent rate for qualifying employees who worked between 120 and 400 hours.
Disabled Access Credit
Small business owners like optometrists with fewer than 30 employees in the previous year can claim a non-refundable credit for providing disabled access. Your business must earn $1 million or less to qualify. This credit is available every year you incur access expenditures.
Barrier Removal Tax Deduction
Businesses can claim up to $15,000 per year for qualified expenses on removing architectural and transportation barriers to the elderly or individuals with disabilities.
8. Defer Capital Gains
Businesses seeking to defer capital gains tax in 2025 have several strategic tax planning avenues available. These include:
1031 Exchange (Like-Kind Exchange): This allows businesses (and individuals) to defer capital gains taxes when they sell an investment property and reinvest the proceeds into another "like-kind" property of equal or greater value within 180 days of the original sale.
Opportunity Zone (OZ) Investments: Opportunity Zones are economically distressed communities where new investments, through Qualified Opportunity Funds (QOFs), receive preferential tax treatment. You can defer capital gains tax on prior gains by investing in a new clinic in a QOF. Your new investment may then benefit from tax-free appreciation if you hold onto the asset for 10 years or more.
Tax-Loss Harvesting: Businesses can strategically sell investments at a loss to offset capital gains realized in the same year. You can also use capital losses that exceed capital gains (with a limit of $3,000) to offset ordinary income. Any remaining loss can be carried forward indefinitely to offset future gains.
Secure Your Financial Future With the Right Advice
Effective tax planning is a proactive and essential pillar for the sustained growth and profitability of any optometry practice. Strategies ranging from maximizing depreciation to optimizing business structure and retirement contributions offer significant opportunities to reduce your tax burden.
Navigating the complexities of tax law requires precision and foresight. Achieve long-term financial independence by getting the right help from a tax professional with experience in medical practices.
