Who we work with
We work with veterinary practice owners whose practices bring in $1 million or more in annual revenue: general and companion animal clinics, emergency and specialty hospitals, mixed and large animal practices, and owners with more than one location.
At this size, the practice is doing well, but the tax picture has gotten complicated. You may be adding doctors and support staff, buying imaging and surgical equipment, thinking about owning your building, or weighing an offer from a buyer. Each of those decisions has a tax impact, and the best time to plan for it is before you commit.
The tax and financial challenges vet owners face
Veterinary practices combine medicine, retail, and a large team under one roof. That mix creates planning opportunities, and a few traps.
Expensive equipment
Digital X-ray, ultrasound, dental units, surgical suites, and lab analyzers are big purchases. When and how you buy them, and how they’re depreciated, can change your tax bill in the year you buy.
Pharmacy and retail inventory
Medications, vaccines, prescription diets, and retail products need to be tracked as inventory and cost of goods sold, not just expensed as bills come in. Retail sales can also carry sales tax obligations.
Owner pay and associate pay
Setting your own salary in an S corp, paying associate veterinarians, and structuring production pay all affect payroll tax and your deductions. Each one needs a plan and good documentation.
Payroll-heavy teams
Technicians, assistants, client service staff, and kennel staff add up to a large payroll. Payroll tax filings, benefits, and retirement plans for your team all need to run smoothly.
Multiple locations and the building
Adding a second clinic or buying your building raises questions about entity structure. Many owners hold real estate in a separate entity and lease it to the practice.
Buying in, buying out, or selling
Practice acquisitions, partner buy-ins, and sales to larger groups are common. How the purchase price is allocated between equipment, goodwill, and other assets affects taxes for both sides.
Strategies that often fit veterinary practices
Every practice is different, and we only recommend what fits your numbers and your goals. These are strategies that often come up for vet owners.
- Section 179 and 100% bonus depreciationImaging, dental, and surgical equipment can often be deducted in the year it’s placed in service, which matters when you’re equipping a new exam room or location.
- S corp reasonable compensationPractice owners who also see patients need a salary that’s defensible and well documented, while the rest of the profit can come out as distributions.
- Own the building, rent it to yourselfHolding your clinic building in its own LLC can protect it from practice liability and set you up for a cleaner sale of the practice later.
- A cash balance plan on top of your 401(k)Profitable owners 45 and up may be able to deduct far more for retirement than a 401(k) alone allows, though staff contributions are part of the cost to plan for.
- The Oklahoma PTE electionOklahoma practice owners with S corps or partnerships may be able to turn state income tax into a federal business deduction.
- The 20% QBI deductionVeterinary services count as a health field for this deduction, so it can phase out at higher incomes. Planning ahead can help you keep some or all of it.
Advanced strategies for higher-income owners
Owners of larger or multi-location practices, and owners getting offers from corporate groups, often need more than the basics.
- Selling to a corporate groupAsset vs. stock sale and how the price is split between goodwill, equipment, and a non-compete can change your tax on the same price.
- Avoiding the 3.8% net investment income taxRent your practice pays to your own building LLC can stay out of the 3.8% tax when the rules are met.
- C corp vs. S corpFor practices that keep profit in the business to grow, the 21% corporate rate is worth testing against your S corp.
- Lifetime gifts and SLATsMove future growth of your practice or other assets out of your estate under the $15 million exemption.
- The backdoor Roth IRAHigh earners above the Roth income limits can often still build tax-free retirement savings.
- Donor-advised fund bunchingGroup several years of giving into one year so your gifts still lower your taxes.
Everything under one roof
One monthly Tax Plan covers your practice and your personal taxes. Plans start at $475 per month and are priced by complexity, and you’ll know your price before you commit.
- Year-round tax planningWe project your tax bill all year and plan big purchases, hires, and new locations before you commit.
- Business and personal returnsYour practice return and your personal return, included in your plan.
- BookkeepingMonthly books, including pharmacy and retail inventory, so your plan runs on real numbers.
- Payroll for your whole teamDoctors, technicians, and support staff, with payroll tax filings handled.
- Sales taxTracking and filing for taxable retail product sales.
- 1099sPrepared and filed for relief veterinarians, contractors, and vendors who need them.
- Quarterly estimated paymentsFederal and state amounts calculated for you, with personal and business taxes shown separately.
- IRS audit protection and representationIf a notice or audit comes, we represent you before the IRS and handle it with you.
- CFO-style reportingClear reports on profit, cash, and how each location is performing.
- Direct access to your advisorCall before you decide, not after.
An illustrative example: how the price is split when you sell
Picture a veterinarian who sells the assets of a practice to a corporate group for $4,000,000. The buyer’s first draft puts $700,000 toward a personal non-compete agreement. After planning, the final agreement puts $200,000 toward the non-compete and moves $500,000 to goodwill, which matches what the buyer is really paying for.
For illustration purposes. Tax law may change, which may change these calculations slightly.
| Buyer’s first draft | After planning | |
|---|---|---|
| Non-compete (ordinary income, 37%) | $700,000 | $200,000 |
| Federal tax on the non-compete | $259,000 | $74,000 |
| Moved to goodwill (capital gain, 20%) | $0 | $500,000 |
| Federal tax on the amount moved | $0 | $100,000 |
| Federal tax on this $700,000 of the price | $259,000 | $174,000 |
The same $4,000,000 price leaves the owner about $85,000 less in federal income tax ($259,000 − $174,000). In an asset purchase, the buyer generally deducts both the non-compete and goodwill over 15 years, so the buyer often has little tax reason to insist on a large non-compete. Oklahoma personal tax on the sale is figured separately, and Oklahoma’s capital gain deduction may apply to part of it, which we confirm.
The allocation has to be realistic and supported, and both sides report it to the IRS on Form 8594. Equipment sold in the deal can bring depreciation recapture taxed as ordinary income either way. The best results come from planning before the letter of intent is signed.
Illustrative example. The veterinarian, practice, and figures above are hypothetical, used to explain how the strategy works. They are not a client and not a promise of results. The example assumes a federal 37% ordinary rate, a 20% capital gain rate, and that the 3.8% net investment income tax doesn’t apply to an owner who works in the practice. This page is educational and is not tax advice for your situation.
Questions vet owners ask us
Should my veterinary practice be an S corp?
Often, yes, once the practice is profitable, but not always. It depends on your profit, how you pay yourself, your state, and your plans for the practice. We look at your numbers and show you the tradeoffs in your free tax analysis.
Can I deduct new equipment all in one year?
In many cases, yes. Section 179 and bonus depreciation can let you deduct qualifying equipment in the year it’s placed in service. Whether that’s the best move depends on your income this year and what you expect next year, so we plan it with you.
I’m thinking about selling to a larger group. When should I talk to you?
As early as possible. The structure of a sale, how the price is allocated, and what you do with real estate you own can all change what you keep after taxes. Planning well before you sign gives you the most options.
Do you work with practices outside Oklahoma?
Yes. We’re based in Norman and fully virtual, and we work with practice owners in Oklahoma and beyond.
Is a veterinary practice a specified service business for the QBI deduction?
Yes. Under the IRS regulations, veterinarians are included in the health field, so the 20% QBI deduction phases out once taxable income is above the limits. Income from a separate business, such as a building you rent to the practice, may be treated differently depending on how it’s set up. We look at that with you.
Can I deduct medications, food, and retail products when I buy them?
Usually not right away. Inventory you sell, such as medications, prescription diets, and retail products, is generally deducted as it is sold, not when you buy it. Practices under the small business gross receipts limit may be able to use a simpler method. We set this up in your books so deductions land in the right year.
Should I own the building my clinic is in?
It can build wealth and give you options when you sell, since you can sell the practice and keep collecting rent. Holding the building in a separate LLC and leasing it to the practice at fair rent is a common structure. We walk through the numbers and the tax impact with you.
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What could a strategy save you?
- S corp
- Solo 401(k)
- Augusta Rule
- Hiring your kids
- Oklahoma PTE