Practice accounting that reads like a chart.

For 2026 the threshold amounts are $201,750 single, head of household and qualifying surviving spouse, and $403,500 married filing jointly, with a phase in range of $75,000 and $150,000, which means the deduction on practice income is gone at $276,750 and $553,500.

The One Big Beautiful Bill Act widened that range from $50,000 and $100,000 for tax years beginning after December 31, 2025, and made the deduction permanent by repealing the sunset that was scheduled to end it. If you are still working a 2025 return on extension, the 2025 thresholds are $197,300 and $394,600 with the old $50,000 and $100,000 range.

The planning work is honest about what it can and cannot do. It is about managing taxable income into the range where any deduction survives, and about correctly separating any genuinely non specified activity. Two things do not work. The crack and pack strategy of splitting out an administrative entity was addressed directly in the regulations.

And moving rent into a commonly owned LLC does not escape the taint, because Reg. 1.199A-5(c)(2) treats a business that provides property or services to a specified service trade or business with 50 percent or more common ownership, counting indirect and related party ownership under sections 267(b) and 707(b), as itself a specified service trade or business to the extent of what it provides.

The de minimis rule in Reg. 1.199A-5(c)(1) can matter for a genuinely mixed business, such as a practice with a substantial retail or product line. It requires less than 10 percent of gross receipts to be attributable to the specified service activity where gross receipts are $25 million or less, and less than 5 percent where they exceed $25 million.

The ownership test asks whether substantially all the stock is held by employees performing those services, retirees, their estates, or people who acquired it by reason of death within the prior two years, so a practice with an outside investor can fail it.

In practice most practices are also under the section 448 gross receipts threshold anyway, so cash basis is available by more than one route. Either way it is worth confirming rather than assuming. Cash basis defers tax on receivables you have not collected, which is why most practices should use it. That is a tax election, not a management decision.

We keep the tax return on cash basis and produce a parallel accrual view of the same months, with revenue at net expected reimbursement and a properly stated receivable, so you manage on when the work happened and file on when the money arrived.

It is that section 179 is limited to taxable income from the active conduct of the trade or business under section 179(b)(3), so a chair, a CBCT unit, or a laser bought in a year that will not produce enough income simply carries forward.

One hundred percent bonus depreciation under section 168(k) carries no such income limit and can create or increase a net operating loss, so for a practice in a buildout year or a first year of operation the order of the elections matters more than the size of them.

One date governs whether you get the full 100 percent: under the One Big Beautiful Bill Act the 100 percent rate applies to qualified property acquired after January 19, 2025, and acquisition date is generally the date a written binding contract was entered into, not the date the equipment arrived.

Property under a binding contract signed before that date sits on the old phase down schedule, which is where owners get surprised. Leasehold improvements to the interior of a nonresidential building generally qualify as qualified improvement property with a 15 year recovery period under section 168(e)(6) and are bonus eligible, which is where most dental and surgical buildouts live.

The definition has real exclusions worth checking before you rely on it: the improvement must be to the interior portion of the building and placed in service after the building was first placed in service, and enlargement of the building, elevators and escalators, and the internal structural framework are all outside it.

If you own the building rather than lease it, a cost segregation study is what separates the shorter life components out of an otherwise 39 year building. Note also that the clean vehicle credits terminated for vehicles acquired after September 30, 2025, so a practice vehicle purchase is now a depreciation question only.

The structures worth modeling are a safe harbor 401(k) paired with a cross tested or new comparability profit sharing allocation, and above that a cash balance plan, which is a defined benefit plan and allows contribution levels well beyond the defined contribution annual additions limit in section 415(c) because it is governed by the benefit limit in 415(b) instead.

A cash balance plan requires an enrolled actuary, an annual actuarial valuation, and a Form 5500 filing. On PBGC coverage, ERISA 4021(b)(13) exempts a plan established and maintained by a professional service employer, and the condition is stricter than people assume: the plan must never have had more than 25 active participants at any time after September 2, 1974.

Cross that line once and the plan stays covered even if headcount later falls back below 26. Two things have to be tested honestly before any of this is designed. First, whether the owner controls other entities, because sections 414(b), 414(c), and 414(m) will aggregate them and the affiliated service group rules in 414(m) were aimed squarely at professional practices.

Second, the SECURE 2.0 section 603 catch up rule, which requires catch up contributions to be made as Roth for participants whose prior year FICA wages from the sponsoring employer exceeded a threshold set at a $145,000 base and indexed from there.

FICA wages here means Social Security wages under section 3121(a), Box 3 of the Form W-2, not Medicare wages in Box 5, and the distinction changes the answer for some owners.

The indexed figure for the year in question and your plan's implementation date both need to be confirmed against the final regulations before anyone relies on them, and we will confirm them rather than quote them from memory.

Partners taking self employment income rather than FICA wages sit outside that rule entirely, which is one more reason entity form and how the owner is paid have to be decided together.

On the way out, payments to a retiring or deceased partner fall under section 736 and the split between payments for their interest in partnership property and other payments changes the character and the timing for both sides, so it is negotiated, not discovered afterward.

Where a practice is a corporation, the choice between a redemption under section 302 and a cross purchase between shareholders produces very different basis outcomes for the remaining owners. In an asset sale of a practice, both buyer and seller file Form 8594 and the allocations must be consistent, and purchased goodwill and going concern value amortize over 15 years under section 197.

Personal goodwill, meaning goodwill attached to the individual rather than the entity, is a real position in some practice sales and a badly documented one in many.

Any of these that touch a C corporation history need the section 1374 built in gains tax checked before anything is signed, because the recognition period runs five years from the S election and selling inside it changes the arithmetic for the seller.