Running a thriving optometry practice requires more than just providing excellent patient care. Managing overhead, investing in new equipment, and navigating ever-changing tax laws can significantly impact your bottom line. While many optometrists focus on growing revenue, few pay close attention to tax strategy—an oversight that can cost thousands in unnecessary taxes every single year.
Yes, you read that right. By unknowingly overpaying the IRS, successful practice owners miss out on tens of thousands of dollars in legal tax savings—money that could be reinvested into their business, retirement, or personal wealth.
The good news? With the right planning, you can legally reduce your tax burden and keep more of your hard-earned money.
In this article, we’ll cover the three most common and costly tax mistakes optometrists make—and how avoiding them could put six figures back in your pocket over the next few years. Whether you're an established practice owner or just starting out, these insights can make a significant difference in your financial future. Let’s dive in.
Mistake #1: Paying Yourself the Wrong Salary in an S-Corp
One of the biggest financial missteps successful optometrists make is how they pay themselves. Many practice owners structure their business as an S-Corporation (S-Corp) to take advantage of tax savings, but without a strategic compensation plan, they end up overpaying in payroll taxes—or worse, attracting IRS scrutiny.
Why Your Salary Matters in an S-Corp
As an S-Corp owner, you don’t receive a traditional paycheck like an associate optometrist would. Instead, you’re both the business owner and an employee of your own corporation. This means your income is split into two parts:
Salary - This is your W-2 income, subject to payroll taxes (Social Security and Medicare).
Distributions - The remainder of your profits, which are not subject to payroll taxes.
The key to tax efficiency is striking the right balance. Paying yourself too much in salary means you’re overpaying in payroll taxes, while paying yourself too little increases your risk of an IRS audit.
The Cost of Overpaying Your Salary
Many optometrists set their salary arbitrarily high—often out of caution or habit—without realizing the tax implications. Let’s look at an example:
Dr. Smith, an optometrist, earns $300,000 from her S-Corp.
She decides to take a $200,000 salary, leaving $100,000 in distributions.
Payroll taxes (Social Security + Medicare) on her salary total $18,840.
Now, what if she adjusted her salary to a more reasonable $90,000, supported by industry benchmarks?
- Her new payroll tax liability would drop to $6,885, saving her $11,955 in Social Security taxes.
- She also avoids $5,800 in excess Medicare tax, bringing her total tax savings to $17,755 per year.
This Doesn’t Reduce Your Take-Home Pay
A common misconception is that lowering your salary means taking home less money. That’s not the case. Dr. Smith still earns $300,000 per year, but instead of taking it mostly as taxable wages, she shifts more of it into S-Corp distributions, which aren’t subject to payroll taxes.
She can still pay herself weekly or biweekly distributions, just like a paycheck. The only difference? She’s keeping more of her money rather than giving it to the IRS.
How Low is Too Low? The IRS Rule on “Reasonable Compensation”
Of course, you can’t just pay yourself a tiny salary to maximize tax-free distributions. The IRS requires S-Corp owners to take a “reasonable salary” based on industry standards, qualifications, and the services you perform. The challenge? The IRS doesn’t define a precise formula for what’s “reasonable,” but they do look at factors such as:
- Your experience and role in the business
- How much similar optometrists are paid in the marketplace
- Your practice’s revenue and profits
- Time spent on patient care vs. administrative work
Failing to meet this standard could result in an IRS audit, where they could reclassify your distributions as wages, forcing you to pay back payroll taxes (plus penalties and interest).
Most optometrists don’t have the time or the tools to determine their optimal salary strategy—and that’s where a tax expert comes in.
Mistake #2: Missing Out on Key Business Deductions
Many optometrists unknowingly overpay the IRS every year simply because they don’t take full advantage of available business deductions. Between patient care, managing staff, and growing their practice, tax strategy often takes a backseat—leading to missed opportunities to legally lower their tax bill.
The tax code is designed to benefit business owners, but only if they know what to deduct and how to do it correctly. The reality is, most optometrists are leaving thousands of dollars on the table.
The Most Overlooked Deductions for Optometrists
While standard expenses like office rent and utilities are obvious deductions, many optometrists fail to maximize tax-saving opportunities in these key areas:
How Much Are You Leaving on the Table?
By not taking full advantage of these deductions, an optometrist could be overpaying the IRS by $30,000 or more annually—money that could be reinvested in the practice, retirement, or personal wealth.
The problem isn’t that these deductions aren’t available. It’s that most optometrists either don’t know about them or don’t track them properly. That’s where working with a tax expert can make all the difference.
Mistake #3: Failing to Maximize Depreciation on Equipment & Office Buildout
Running an optometry practice isn’t cheap. Between diagnostic equipment, office furniture, and leasehold improvements, practice owners often spend hundreds of thousands of dollars just to keep their office up to date. The good news? The IRS allows you to deduct these costs over time. The bad news? Most optometrists don’t realize they could be deducting much more, much faster.
The Depreciation Trap: Why Most Optometrists Pay More Than They Should
When you buy new equipment—whether it’s an OCT, an autorefractor, or a retinal imaging system—the IRS typically expects you to spread out the deduction over 5 to 7 years. If you renovate your office, those costs might be spread over 15 or even 39 years.
That’s a long time to wait for your tax savings. But here’s the thing: You don’t have to wait.
How Smart Practice Owners Cut Their Tax Bill
There are tax strategies available right now that allow you to deduct more of these expenses upfront, reducing your tax bill significantly in the year you make the investment.
For example, instead of slowly writing off a $150,000 equipment purchase over several years, an optometrist could potentially deduct $90,000 or more immediately—saving $27,000 or more in taxes this year alone.
The same goes for office renovations and leasehold improvements. Many optometrists think they have to depreciate these expenses over decades when, in reality, there are legal ways to unlock tens of thousands of dollars in deductions much sooner.
How Much Are You Leaving on the Table?
If you’ve recently bought equipment, upgraded your office, or are planning a build out soon, there’s a good chance you could be saving $30,000–$50,000 (or more) in taxes this year—if you structure things correctly.
The problem? The IRS doesn’t make it easy. Depreciation rules are complicated, and most optometrists either don’t know their options or aren’t using them to their full advantage. That’s where expert guidance makes all the difference.
Stop Overpaying the IRS—It’s Time to Take Control of Your Taxes
If you’ve been making one (or more) of these tax mistakes, you’re not alone. Even the most successful optometrists unknowingly leave tens of thousands of dollars on the table every year—simply because they don’t have the right strategy in place.
A smart tax plan isn’t just about compliance—it’s about keeping more of what you earn so you can reinvest in your practice, your future, and your financial security. With the right approach, you could:
Lower your payroll taxes without changing your take-home pay
Maximize deductions you're already eligible for
Accelerate depreciation and free up cash for your business
Legally reduce your tax burden - year after year
The key is knowing exactly which strategies apply to your situation - and that's where expert guidance makes all the difference.
The best tax strategies don't happen by accident. If you want to stop overpaying in taxes and keep more of your hard-earned money, let's talk.
Schedule a call today and let's create a tax plan that works for you.
