Year-end tax planning guide for clinic owners (tax year 2025)
Q4 is your last window to reduce your tax liability before December 31. Equipment purchases, retirement contributions, and entity structure decisions all have year-end deadlines. Figures shown reflect tax year 2025; 2026 figures will be released by the IRS later this year.
Equipment purchases and Section 179
Section 179 lets you deduct the full purchase price of qualifying equipment in the year you buy it, rather than depreciating it over several years. For tax year 2025, under IRS Rev. Proc. 2024-40, the Section 179 deduction limit is $1,250,000, with the phase-out beginning when total Section 179 property placed in service exceeds $3,130,000. The 2026 figures will be released later this year in a new Rev. Proc. — verify before relying on the numbers.
Medical equipment, computers, office furniture, and vehicles used for business all qualify. If you have been delaying an equipment purchase, buying before December 31 lets you take the full deduction on your current-year return. See IRS Publication 946 for the complete list of qualifying property.
The equipment must be placed in service (not just ordered) by December 31. If you are buying anything with a lead time, act now. A purchase order signed in November that does not arrive until January counts for the following tax year.
Retirement plan contributions
If you have a SEP-IRA, for tax year 2025 you can contribute up to 25% of net self-employment compensation, with a maximum contribution of $70,000 (per Rev. Proc. 2024-40 and IRS Notice 2024-80). Contributions can be made until your tax filing deadline (including extensions), but deciding the amount now helps with cash flow planning.
Solo 401(k) plans require the employee contribution election to be made by December 31, even though the employer contribution can be made until the filing deadline. For tax year 2025, the employee elective deferral limit is $23,500, with an additional catch-up contribution of $7,500 for participants age 50 and over (per IRS 401(k) contribution limits). If you do not have a Solo 401(k) set up, you must establish the plan by December 31 to make any current-year contributions.
For multi-provider practices with employees, review your 401(k) match. Are you maximizing your own contribution? Are your match costs aligned with your retention goals?
Income deferral strategies
If your current-year income is higher than expected, consider deferring revenue into next year where legally appropriate. For cash-basis practices, this means delaying billing for December services until January. For accrual-basis practices, the options are more limited.
Be careful. Income deferral only makes sense if you expect to be in a lower tax bracket next year or if you need to avoid specific income thresholds (like the qualified business income deduction phase-out). Deferring income into a year when your bracket will be higher costs more than it saves.
Estimated tax payments
Your Q4 estimated tax payment is due January 15 of the following year. If your current-year income is significantly different from the prior year, your estimated payments may be off. The IRS underpayment penalty is based on the federal short-term rate plus 3% and adjusts quarterly — check the current rate on IRS.gov.
Run a quick projection now. Compare your year-to-date income with your total estimated payments. If you are behind, adjust your January payment. If you are way behind, consider making an additional payment in December.
Entity structure review
If you are operating as a sole proprietorship or single-member LLC, the end of the year is the right time to evaluate whether an S-Corp election would save you money. S-Corp elections (Form 2553) for a given tax year must generally be filed by March 15 of that year, but the analysis should happen now.
For practices earning $200,000+ in net income, the self-employment tax savings from an S-Corp election often exceed $15,000-$25,000 annually. The trade-off is additional payroll costs and complexity. A qualified CPA should run the numbers for your specific situation.
Charitable giving and other deductions
If you itemize, charitable contributions must be made by December 31. Donating appreciated stock avoids capital gains tax while still providing the full fair market value deduction.
Review your other deductible expenses. Prepaying January rent in December, stocking up on supplies, or paying outstanding invoices all accelerate deductions into 2026. These are small moves individually, but they add up.
What to do now
List any equipment purchases you have been considering and determine which qualify for the <a href="https://www.irs.gov/publications/p946" target="_blank" rel="noopener noreferrer">Section 179</a> deduction before December 31.
Review your retirement plan type and calculate your maximum current-year contribution. Establish a Solo 401(k) by December 31 if needed.
Run a current-year income projection and compare it against your estimated tax payments to identify any shortfall.
Evaluate whether an S-Corp election makes sense for next year and schedule a meeting with your CPA to run the numbers.
Identify any deductible expenses you can accelerate into the current year (prepaid rent, supply purchases, outstanding invoices).
Verify all tax figures above against the current <a href="https://www.irs.gov" target="_blank" rel="noopener noreferrer">IRS.gov</a> guidance with your CPA before acting.
Who this affects
Founder of Sorso. 18 years in corporate finance. Managed a $450M loan portfolio before building a fractional CFO firm exclusively for healthcare clinics.
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