A growing number of doctors add side practices such as consulting, teaching, telemedicine, 確定申告 節税方法 問い合わせ or a small clinic to their primary work. While these activities can boost income, they also add layers of tax complexity. Effective planning can lower tax liability, protect cash flow, and keep you compliant with federal and state rules. This is a practical guide to navigating tax planning for doctors with side practices.

Why Side Practices Are Important Side practices alter the tax classification of your income. Earnings that would otherwise be taxed as salary shift to self‑employment income, subject to SE tax (Social Security and Medicare). A blend of W‑2 income from your primary job and 1099 income from a side practice produces a hybrid tax environment. Each type of income has different deduction rules, reporting requirements, and timing considerations.

Essential Tax Concepts for Physicians 1. Self‑Employment Tax (SEAT) – 15.3% on net self‑employment income. 2. Qualified Business Income deduction – up to 20% of QBI under Section 199A, subject to limits. 3. Corporate Tax Rates – if you incorporate, you may benefit from lower corporate rates and distinct liability. 4. State Taxes – many states tax medical income differently; some offer special exemptions or lower rates for medical professionals.

Selecting the Appropriate Entity

Schedule C

Simplest to set up; earnings are reported on Form 1040 Schedule C. All expenses are deducted on the same form; no separate corporate filing required. SE tax is due on the net profit.

Limited Liability Company (LLC)

A single‑member LLC behaves like a disregarded entity, matching a sole proprietorship unless you opt for corporate tax. A multi‑member LLC files Form 1065, with each member receiving a K‑1. Provides liability protection without corporate formalities.

S‑Corporation

Pay yourself a reasonable salary (W‑2) and take the remaining profits as shareholder distributions. Salary incurs payroll taxes, but distributions avoid SE tax. Involves payroll setup, quarterly payroll tax filings, and compliance with IRS reasonable‑compensation rules.

C Corporation

A distinct legal entity; profits taxed at the corporate level (21% federal) and again upon dividend distribution. Ideal for larger side practices or when you plan to reinvest earnings. Needs detailed corporate governance and annual meetings.

Best Practice: Most physicians find an S‑Corp or LLC with an S‑Corp election strikes the right balance of simplicity, liability protection, and tax efficiency. Nonetheless, the choice relies on revenue, number of staff, and future goals.

Tax‑Deductible Expenses

Lease

Utilities, Internet, and Phone services

Professional Liability Coverage

Continuing Medical Education (CME) and Licensure Fees

Medical equipment and supplies like instruments and computers

Marketing and Advertising expenses

Depreciation of Capital Assets

Health Insurance Premiums if self‑insured

Business‑related Travel and Meals (50% deduction for meals)

Home Office Deduction – if you use a dedicated space for patient care or administrative tasks.

Remember: All expenses must be ordinary, necessary, and directly related to the side practice. Keep detailed records, receipts, and a mileage log if you’re claiming a home office or vehicle deduction.

Timely Self‑Employment Tax Payments

• Quarterly estimated tax payments (Form 1040‑ES) are required if your side practice produces $1,000 or more in self‑employment tax.
  
• Employ the safe‑harbor rule: pay 90% of prior year’s tax or 100% of current year’s tax (110% if AGI exceeds $150,000).
  
• Automating payroll for an S‑Corp lowers the chance of underpayment penalties.
  
  

Qualified Business Income (QBI) Deduction

• The QBI deduction allows a 20% deduction on qualified business income from a pass‑through entity.
  
• Limitations apply for high‑income doctors: wage and capital limitations, and the 20% threshold.
  
• A careful review of your total income and the type of side practice is essential to maximize the deduction.
  
  

Health Insurance & Retirement

• Self‑insured doctors can deduct 100% of their premiums from gross income.
  
• Establish a Solo 401(k), SEP IRA, or defined‑benefit plan to defer income and reduce taxable wages.
  
• Contribution limits are set by IRS rules; a financial advisor can help you stay compliant.
  
  

Recordkeeping & Documentation

• Separate bank accounts for primary practice and side practice.
  
• Maintain a detailed ledger for all income and expenses.
  
• Use accounting software tailored for medical practices to track reimbursable items, write-offs, and tax documents.
  
• Retain records for at least seven years in case of audit.
  
  

State and Local Considerations

• Some states (e.g., Texas, Florida, Nevada) have no state income tax, which simplifies your situation.
  
• Other states like California and New York levy extra taxes on medical income.
  
• Look into local licensing fees, business taxes, and health department permits that could apply.
  
  

Timing Tactics

• Delay income: Transfer receipt of sizable invoices to the next year to lessen current year tax.
  
• Accelerate deductions: Pay rent or purchase equipment before year‑end to increase deductions.
  
• Consider using a "cash‑basis" entity to match income and expenses more closely.
  
  

Hiring Workers or Contractors

• Employees require payroll taxes, benefits, and compliance with labor laws.
  
• Independent contractors (1099) can reduce payroll burden but increase audit risk.
  
• Engage a qualified tax professional to classify workers properly and avoid penalties.
  
  

Working with a Tax Professional

• A CPA or tax attorney versed in medical practice taxes can assist with entity choice, deduction maximization, and compliance.
  
• Collaborate with a professional to handle quarterly estimates, payroll setup, and audit defense.
  
• Consistently evaluate your tax strategy.
  
  

Common Mistakes to Avoid

• Mixing personal and business expenses in the same bank account.
  
• Not maintaining detailed mileage logs for vehicle use.
  
• Failing to estimate SE tax accurately, leading to missed quarterly payments.
  
• Ignoring QBI limits and not structuring the side practice for qualification.
  
• Neglecting state‑specific tax rules applicable to medical professionals.
  
  

Final Thoughts

Running a side practice can significantly increase your income, but it also introduces a range of tax responsibilities. Choosing the right entity, maximizing deductions, managing SE tax, and using retirement and health‑insurance plans lets you retain more income. Ongoing partnership with a qualified tax professional and thorough recordkeeping underpin solid tax planning for doctors running side practices. With the right approach, you can focus on delivering quality care while minimizing your tax burden.