Q3 tax planning for medical and dental practice owners: what to review before year-end.

2026 figures at a glance

What financial information should you review?

Effective tax planning for medical practice owners begins with reliable books. Review financial statements through August against the budget and the same period last year, and look beyond total revenue. A practice can show growing production while collections remain slow. Accounts receivable, insurance adjustments, denied claims, and patient payment patterns can each affect cash flow and projections.

Flag anything that changed during the year: a new associate, partner, or location; shifts in patient volume or payer mix; higher payroll, supply, or lab costs; equipment or software purchases; new debt; or larger owner distributions. Clean books allow your CPA to build a useful projection. Incomplete or misclassified records turn that projection into a guess.

How should you recalculate projected taxable income?

Estimate the remaining months using scheduled procedures, expected collection delays, staffing changes, planned bonuses, and recurring costs rather than multiplying one month’s profit by four. Healthcare practices can experience seasonal changes in appointments, deductibles, and elective procedures that a flat calculation may miss.

Factor in income outside the practice, too. Effective tax planning for dentists should connect the practice’s results with the owner’s complete tax picture, including investment income, capital gains, rental activity, a spouse’s wages, consulting income, and other income sources.

Are your estimated payments still enough?

The 2026 federal estimated-tax deadlines are April 15, June 15, September 15, and January 15, 2027. The required annual payment is generally the smaller of 90% of the current year’s expected tax or 100% of the previous year’s tax. The prior-year safe-harbor percentage generally rises to 110% when prior-year adjusted gross income exceeded $150,000, or $75,000 for married taxpayers filing separately.

Meeting the safe harbor can help avoid an underpayment penalty. It does not eliminate the balance due. A practice that grew substantially during 2026 may satisfy the safe harbor and still owe a large amount when the return is filed. Those are two separate issues, and the payment strategy should address both.

If income arrived unevenly, the annualized income installment method may better match required payments to when income was earned. It involves an additional calculation and should not be assumed to apply automatically.

Does S corporation status automatically reduce your taxes?

An S corporation election does not automatically produce tax savings. It changes how certain income is taxed. An owner who works in the practice must generally receive reasonable compensation before taking non-wage distributions. Compensation should reflect the owner’s role, hours, experience, responsibilities, practice profitability, and comparable market pay.

Review wages and distributions before the final payrolls of the year, especially if the practice has grown or the owner’s role has changed since compensation was last evaluated.

Medical and dental practices are generally specified service trades or businesses under Section 199A. For eligible taxpayers below the applicable 2026 taxable-income threshold, the SSTB limitation generally does not restrict the potential 20% qualified business income deduction. The limitation begins to phase in above approximately $201,750 for single filers and $403,500 for married couples filing jointly. The SSTB deduction is generally fully phased out above approximately $276,750 and $553,500, respectively.

Within that range, reducing taxable income may also preserve part of the QBI deduction. Because these decisions can affect one another, tax planning for medical practice owners should evaluate compensation, retirement contributions, depreciation, and the QBI deduction together.

Should you buy equipment before year-end?

For 2026, Section 179 expensing is limited to $2,560,000, with the phaseout beginning when the total cost of qualifying property placed in service exceeds $4,090,000. Bonus depreciation is generally 100% for eligible property acquired and placed in service after January 19, 2025.

Equipment purchases can be an important part of tax planning for dentists, particularly when a practice is considering scanners, imaging systems, treatment equipment, or technology upgrades. However, the potential deduction should be weighed against the purchase’s impact on patient care, profitability, financing, and cash flow.

The equipment must generally be delivered, installed, and ready for use by year-end—not merely ordered or paid for—to qualify for a 2026 deduction. Review substantial purchases with your CPA before signing, as the appropriate treatment depends on eligibility, taxable income, business use, financing, and when the equipment is placed in service.

Can retirement contributions lower your tax bill?

For 2026, the 401(k) elective-deferral limit is $24,500. The catch-up limit for participants age 50 or older is $8,000, while the enhanced catch-up limit for eligible participants ages 60 through 63 is $11,250. The defined-contribution plan limit is $72,000, excluding catch-up contributions and subject to other applicable limits.

Profit-sharing plans, SEP IRAs, SIMPLE IRAs, defined benefit plans, and cash balance plans may suit different owner ages, income levels, staffing profiles, and funding goals.

Retirement-plan deadlines depend on the plan’s design. Some safe harbor arrangements may need to be established months before year-end, while different timing rules can apply to nonelective contributions. Beginning the conversation in September gives the practice owner, CPA, and plan administrator more time to compare the available options, complete plan documents, and plan for the required cash contribution.

Which deductions and cash reserves should you review?

Review ordinary expenses already incurred, including payroll, clinical supplies, lab fees, malpractice coverage, licensing, continuing education, software, and professional fees. The goal is to capture legitimate expenses with adequate documentation, not manufacture deductions or purchase something solely for a tax benefit.

Separate personal and business spending. Review vendor accounts, credit-card activity, and fixed-asset listings for duplicate, omitted, or misclassified transactions. Also confirm that owner distributions, loan payments, reimbursements, and personal expenses paid by the practice have been recorded correctly.

A profitable practice can still run short of cash because reimbursements may arrive weeks after services are performed, while payroll and taxes do not wait. Use the updated projection to estimate remaining federal payments, payroll deposits, retirement-plan funding, and equipment costs. Then establish a dedicated reserve based on those expected obligations rather than relying on a generic percentage.

How Next Level CPA helps medical and dental practice owners

Effective healthcare practice tax planning does not begin with a last-minute search for deductions during filing season. It starts with accurate books, a realistic projection, and enough time to compare practical options before year-end deadlines limit what can be done.

Next Level CPA provides proactive tax planning for medical practice owners and dentists in Jacksonville and across the country, connecting tax decisions with cash flow, compensation, practice growth, and long-term financial goals.

If you want a clearer picture of where your 2026 tax position stands, schedule a consultation with Next Level CPA to identify the decisions that should be made before year-end.