Tax Strategies for Medical Professionals: Entity Structure & Retirement Plans

CPA for Medical Practice | CPA for Healthcare Professionals | Dentist CPA in Los Angeles

Whether you’re a dentist running your own practice, a doctor starting a private clinic, or any healthcare professional branching out on your own — smart tax planning can make a huge difference in how much you keep versus how much you send to the IRS.

At Velin & Associates, Inc, we help medical professionals, dental practices, and healthcare providers set up the right entity structure and retirement plans to maximize tax savings — legally.

Choosing the Right Entity Structure

One of the first — and most important — tax decisions for any medical professional is choosing the right business entity. Your entity type affects how you’re taxed, how you pay yourself, and how much liability protection you have.

Sole Proprietor or Single-Member LLC

This is how many new dental or medical practices start — simple and inexpensive. But it may not offer the best tax benefits as you grow.

S-Corporation (S-Corp)

Once your income grows, many medical practices benefit from electing S-Corp status. This allows you to split your income into salary (subject to payroll taxes) and distributions (which are not subject to self-employment tax).

Example:
A dentist earning $250,000 as a sole proprietor pays self-employment tax on the entire amount. If they switch to an S-Corp, they might pay themselves a reasonable salary of $150,000 and take $100,000 as distributions — potentially saving thousands in payroll taxes. Or, if they keep growing, this split can become even more tax-efficient.

Partnership or Multi-Member LLC

If you co-own your medical or dental practice with other professionals, a partnership or LLC taxed as a partnership can make sense. It provides flexibility for sharing profits and responsibilities — but you’ll want a clear operating agreement to protect everyone involved.

Don’t Overlook Retirement Plans

Another big tax-saving strategy for healthcare professionals is maximizing retirement contributions.

As a self-employed doctor or dentist, you can set up powerful retirement plans that most W-2 employees can’t.

Examples:

1️⃣ Solo 401(k)
Perfect for a solo dentist or doctor with no employees. You can contribute as both employer and employee — up to $69,000 for 2025, or $76,500 if you’re 50 or older.

2️⃣ SEP IRA
Simple to set up and flexible to fund. For 2025, you can contribute up to 25% of your net income, up to $69,000.

3️⃣ Defined Benefit Plan
Best for high-earning medical professionals who want to put away $100,000+ per year. More complex, but these plans can supercharge retirement savings and dramatically reduce taxable income.

Updated Example Scenario
What would you do if you’re a dentist running a solo practice, earning $300,000 a year?
Without a plan, you pay tax on the full amount. With an S-Corp plus a Solo 401(k) or SEP IRA, you could pay yourself a reasonable salary, reduce self-employment taxes, and shelter tens of thousands with retirement contributions. Do you know which option saves you more?

Avoid Common Mistakes

Too many healthcare professionals make costly tax mistakes:

🚫 Picking the wrong entity type for their growth stage
🚫 Missing payroll compliance for S-Corps
🚫 Not funding retirement plans consistently
🚫 Mixing personal and business expenses
🚫 Not working with a CPA who understands the unique needs of medical and dental practices

The Bottom Line

The right entity structure and retirement plan can mean thousands — or even tens of thousands — in annual tax savings for medical professionals.

At Velin & Associates, Inc, we specialize in helping doctors, dentists, and healthcare professionals structure their practices wisely and keep more of what they earn.

For more information about our services, please visit our website.

Velin & Associates, Inc

8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org