Running a medical practice in Florida is a rewarding journey, but it comes with its share of responsibilities – taxes being a significant one. For many practitioners, navigating tax rules can feel overwhelming. The good news? By understanding the basics, you can simplify the process, avoid common pitfalls, and uncover opportunities to save money. This guide will give you a clear overview of the essential tax considerations every medical practitioner in Florida should know.
Choosing a Business Structure for Your Medical Practice
As a medical practitioner in Florida, your business structure determines how you pay taxes and protect your assets. A sole proprietorship is the simplest option – you report business income on your personal tax return and pay self-employment tax of 15.3%. While easy to manage, your personal assets remain exposed to business risks.
Partnerships work well when sharing a practice with other doctors. Each partner reports their portion of income on personal returns and shares business responsibilities. You’ll make quarterly tax payments and receive documentation (Schedule K-1) showing your share of practice income. Choose partners carefully since you share liability for business obligations.
S Corporations can reduce taxes by paying yourself a reasonable salary plus dividends. This structure requires more paperwork but may lower self-employment taxes. You’ll need separate tax returns and must follow strict IRS rules about compensation.
Professional Limited Liability Companies (PLLCs) provide liability protection while remaining tax-flexible. You can choose how your PLLC is taxed – as a partnership, S Corp, or individual entity. This makes PLLCs popular among Florida medical practitioners who want both asset protection and tax efficiency.
C Corporations face double taxation (business profits and dividend distributions) but offer strong liability protection and benefit options. This structure suits larger practices planning to reinvest profits or have multiple owners.
Regardless of structure, you’ll need an Employer Identification Number (EIN) from the IRS. If you have employees, you must manage payroll taxes and maintain detailed records. Consider consulting a tax professional to choose the best structure for your situation.
Federal Tax Responsibilities for Medical Practice Owners
First, obtain an Employer Identification Number (EIN) from the IRS – your practice’s tax ID needed for banking, filing, and payroll.
You must report all income from your medical practice, including patient care and procedures. Track all business expenses like supplies, rent, and equipment, as these are tax-deductible. Keep organized records year-round.
Self-employment tax (15.3% of net earnings) covers Social Security and Medicare. As a practice owner, you pay both employer and employee portions. This mainly applies to sole proprietors and partners.
The IRS requires quarterly tax payments if you expect to owe $1,000+ annually. Make these payments in April, June, September, and January based on projected income. Late or insufficient payments may incur penalties.
When you hire staff, you must withhold their income tax and Social Security/Medicare taxes. You’re also responsible for paying employer portions and federal unemployment tax. Process payroll taxes regularly and file quarterly returns.
Consult a healthcare-focused accountant to optimize tax strategies and ensure compliance. Their expertise often leads to tax savings that outweigh their fees.
Florida’s Tax Benefits
One of the advantages of running a medical practice in Florida is the lack of state income tax. This means you only deal with federal income tax, saving you money compared to states that tax both. However, Florida does have other taxes to consider:
- Sales Tax: Most medical services are exempt, but if your practice sells taxable items, such as medical supplies or retail goods, you must collect and remit sales tax (Florida’s state rate is 6%, with additional local surtaxes in some areas).
- Use Tax: If you buy medical equipment from out of state and don’t pay sales tax, you must pay use tax in Florida.
Payroll Taxes
If you have employees, you’ll need to handle payroll taxes. This includes:
- Federal Payroll Taxes: These cover Social Security, Medicare, and federal unemployment tax.
- State Unemployment Tax: Florida requires employers to pay state unemployment tax (SUTA), which starts at 2.7% for new employers.
Make sure to withhold and remit taxes accurately to avoid penalties.
Tax Deductions for Medical Practice Owners
Medical Equipment and Supplies
Deduct all qualifying medical equipment, supplies, and disposable items. Large equipment purchases may need to be depreciated over time rather than deducted immediately.
Office Costs
Deduct rent, utilities, office supplies, maintenance, cleaning, and security. Building owners can deduct property taxes and mortgage interest. Parking fees are also deductible.
Staff Expenses
Deduct salaries, benefits, uniforms, training, and professional development. This includes conference fees, travel for medical meetings, and journal subscriptions. Even staff meals during work hours may qualify.
Insurance
Deduct malpractice, liability, workers’ compensation, and property insurance. Employee health insurance premiums are fully deductible. Self-employed practitioners can deduct personal health insurance.
Professional Services
Deduct fees paid to accountants, lawyers, and consultants. Include laboratory fees, billing services, and electronic health record systems.
Marketing and Patient Amenities
Deduct website costs, advertising, business cards, and patient education materials. Small amenities like waiting room refreshments also qualify.
Retirement Planning for Medical Practice Owners
Retirement planning serves dual purposes – securing your financial future while providing immediate tax advantages. A 401(k) plan allows both you and your employees to contribute pre-tax dollars, reducing current taxable income. For 2025, you can contribute up to $23,000 annually, with an additional $7,500 catch-up contribution if you’re over 50. Employer matching contributions are tax-deductible business expenses.
SEP IRAs (Simplified Employee Pension) offer flexibility for smaller practices. As an employer, you can contribute up to 25% of each eligible employee’s compensation, including yourself, with a maximum of $69,000 for 2025. SEP IRAs require minimal administration and allow year-to-year contribution adjustments based on practice performance.
Defined Benefit Plans suit high-earning practitioners seeking substantial tax deductions. These plans calculate contributions based on promised retirement benefits, often allowing annual contributions exceeding $300,000 depending on age and income. While requiring actuarial calculations and ongoing administration, they provide unmatched tax-advantaged retirement savings for peak-earning years.
For enhanced tax efficiency, consider combining retirement plans. A cash balance plan (a type of defined benefit plan) paired with a 401(k) can maximize tax-deductible contributions while providing investment flexibility. Professional guidance ensures compliance with non-discrimination testing and contribution limits.
Healthcare Tax Rules for Florida Medical Practices
The majority of medical services in Florida maintain tax-exempt status, including standard patient care, procedures, and preventive services. However, certain ancillary services or products sold through your practice may be subject to sales tax. Examples include cosmetic procedures, non-prescription products, or medical equipment sales directly to patients.
Medicare and Medicaid participation introduces specific tax considerations. Incentive payments, such as those for electronic health record implementation or quality reporting programs, count as taxable income. These payments require careful tracking and reporting, particularly for practices participating in multiple government programs. Different reporting requirements may apply depending on your business structure and participation level in these programs.
Government program payments often arrive in lump sums, which can impact quarterly estimated tax obligations. Additionally, any penalties or recoupments from these programs may affect your tax deductions. Accurate record-keeping becomes particularly crucial when dealing with government healthcare programs, as documentation requirements often exceed standard business practices.
The Importance of Professional Guidance
Florida medical practices must maintain comprehensive financial records including daily income, expenses, payroll, and equipment purchases. Corporations and LLCs have additional state requirements, including Annual Report filing by May 1 (LLC fee: $150, corporation fee: $138.75).
It’s important that you partner with qualified professionals to navigate healthcare tax regulations. CPAs and tax attorneys specializing in medical practices can identify valuable tax credits like the Work Opportunity Tax Credit and R&D credits. While the initial setup requires effort, establishing proper systems and professional relationships early ensures long-term compliance and financial success.
Our team at MillerThayer is experienced in helping medical practices like yours in Florida. Reach out today to book your consultation with our tax specialists.