"Taxes are what fund everything." That’s a direct quote I often share when discussing the importance of understanding Title 26—the tax code. It’s what keeps our country running. For optometrists, mastering the tax code isn’t just about compliance; it’s about making your practice more efficient and profitable.
In this post, I’ll walk you through some foundational tax strategies that are highly beneficial for practice owners. From leveraging key deductions to planning proactively, these steps can significantly impact your bottom line.
Why Tax Planning Matters for Optometrists
Tax planning isn’t just something you do in April—it’s a year-round activity. As a practice owner, you’re responsible for both your patients and your business, and taxes are one of the biggest expenses you’ll manage. Getting your tax strategy right means you’ll keep more of what you earn, giving you the flexibility to invest in your team, equipment, or even yourself.
Let’s talk about why this matters. Title 26 of the U.S. Code—our tax law—is one of the most important pieces of legislation because it funds everything. Without it, there’s no Homeland Security, no Department of Justice, no Health and Human Services. As small business owners, you’re directly contributing to this system, but the good news is that the code also provides opportunities to reduce your tax burden if you understand how to use it.
Key Tax Deductions for Practice Owners
The tax code is designed to encourage investments in your business, and there are several provisions you can take advantage of as an optometrist.
- Bonus Depreciation:
This one’s big. With bonus depreciation, you can deduct the bulk (60% in 2024) of the cost of equipment—new or used—in the year you purchase it. That means whether you’re buying diagnostic tools or office furniture, you can immediately write off most of the expense instead of spreading it over several years. This deduction was a game changer for many of our clients back in 2018 when it came into play under the Tax Cuts and Jobs Act. - Qualified Business Income Deduction (QBI):
This deduction allows a 20% reduction on your pass-through income. Let’s say you make $100,000 in pass-through income from your practice. Before 2018, you’d pay taxes on the full $100,000. With the QBI deduction, you’re only taxed on $80,000. That’s a significant savings for practice owners operating as S Corporations or Partnerships. - Standard Deduction Changes:
The Tax Cuts and Jobs Act also nearly doubled the standard deduction, which has simplified things for many taxpayers. For example, the standard deduction for single filers is now $14,600, and for married couples, it’s $29,200. This change means fewer people need to itemize deductions, but it also requires careful planning to maximize your tax benefits.
The Role of Proactive Planning
Here’s the thing: waiting until tax season is too late. Tax planning is about looking ahead and making decisions now that will benefit you later.
- Track Everything: Keep detailed financial records throughout the year. It makes life easier for you and your CPA.
- Talk to Your Tax Pro: Schedule regular check-ins with your tax advisor to ensure you’re staying on top of opportunities.
- Plan Ahead: Whether it’s buying equipment, contributing to a retirement account, or considering a home office deduction, proactive planning can save you thousands of dollars.
Conclusion
At the end of the day, tax planning is about making sure your hard work pays off—literally. By understanding and leveraging foundational strategies like bonus depreciation, the QBI deduction, and proactive planning, you can ensure you’re keeping more of your money to invest back into your practice.
Taxes don’t have to be overwhelming. With the right strategies and a solid understanding of the law, you can take control of your financial future. In the next post, we’ll explore more advanced strategies like the Augusta Rule and home office deductions—two areas where practice owners can find significant savings. Stay tuned!
