Year-End Tax Planning for Direct Care Practices: The Q4 Moves That Still Count

So here's the short version. Between now and December 31, your 2026 numbers are still yours to move. After that, we're just writing them down.

I get the same question every October: hey, is there anything left I can actually do this year? Yes. Quite a bit.

What I want you to leave with is three buckets. Every strategy in our e-book, 7 Tax Strategies for Direct Care Practice Owners, lands in one of them this quarter.

Why Q4 Is Where Direct Care Tax Planning Gets Concrete

By October you have nine months of membership revenue on the books. And membership revenue is predictable — a panel paying a set monthly fee is far easier to project than fee-for-service collections ever were. So the last quarter isn't a guess. It's arithmetic.

Here are the three buckets:

1. What runs through payroll — your salary, your retirement deferrals, your kids' wages.
2. What needs a document — accountable plan reimbursements, Augusta Rule days, your membership tiers.
3. What needs a date — equipment in service, your 2027 S-corp decision, and one waypoint in the middle of October.

Bucket One: The Moves That Run Through Payroll

Start by counting your payrolls. Biweekly or semi-monthly, you have about six left in 2026. That's the whole runway for these three moves.

Reasonable comp true-up. In a DPC S-corp, profit splits two ways: a W-2 salary through payroll, and distributions. Only the salary carries Social Security and Medicare tax.

The goal isn't the lowest number. It's a defensible one — tied to the clinical and administrative work you actually do. Taking distributions with no salary is one of the most common S-corp audit risks. The fix runs through those six payrolls.

Retirement deferrals. Your salary does double duty. It sets how much you can put into a 401(k) and a cash balance plan. For 2026, the employee deferral limit is $24,500. Add an $8,000 catch-up at 50 and older, or $11,250 if you're 60 to 63, inside a $72,000 total defined contribution limit. And new this year: if your prior-year wages from the practice topped $150,000, catch-up contributions go in as Roth.

Deferrals run through payroll and have to be elected by year-end. Plan documents have adoption deadlines too — some fall before December 31, some later. So if you don't have a plan yet, October is the month for that conversation.

Hiring your kids. If your children do real work — filing, scanning, restocking, front desk for teens — you can pay them a fair wage through payroll and deduct it. Each child can earn up to $16,100 in 2026 free of federal income tax, if wages are their only income. With four boys at home, I think about this one more than most.

Entity type matters. In an S corp, their wages carry payroll tax like anyone else's; a family management company is the common workaround. Timesheets and a simple job description. That's the paperwork.

Bucket Two: The Moves That Need a Document

These don't need payroll. They need paper.

Accountable plan reimbursements. Direct Care work doesn't stay inside the clinic. Charting from home at night. A personal cell for member texts. Mileage to employer sites. License and DEA renewals.

Under an accountable plan, the practice reimburses you, deducts the expense, and the reimbursement isn't taxable wages. The rules: a business connection, substantiation (amount, date, purpose), reported within a reasonable time, excess returned. The Q4 move is to gather the year's receipts and mileage and get reimbursed while the year is open. An afternoon.

Augusta Rule days. You can rent your home to your practice for up to 14 days a year. The practice deducts the rent; you exclude the income. It only works if the practice is an S corp, C corp, or partnership.

The whole strategy lives in the documentation. It's not a date on a calendar. It's not a family dinner with a spreadsheet open. It's not a guess at the rent. It's a real business purpose, an agenda, minutes, a written lease, and a fair market rate for a comparable local venue — space only, not meals. The Tax Court has denied this deduction when the rent and the business use weren't documented.

Your annual planning day — pricing, panel goals, 2027 hiring — is a natural fit, held at home. And count the days you've used. Past 14, all of it becomes reportable.

Membership tiers against the 2026 DPC and HSA caps. Starting January 1, 2026, a qualifying DPC arrangement no longer blocks someone from contributing to an HSA. Membership fees up to $150 a month for an individual or $300 a month for a family now count as qualified medical expenses.

Fall is open enrollment for your employer clients and your staff. So look at your tiers. Inside the caps? Is the membership fee your only compensation for that care? Billing separately for covered services disqualifies it, so review how you charge for labs, dispensing, and add-ons. The caps are indexed after 2026, so we'll recheck 2027.

This isn't really a move for your return. It's a positioning move for 2027 revenue.

Bucket Three: The Moves That Need a Date

Equipment placed in service by December 31. Section 179 and bonus depreciation let you deduct qualifying costs in the year the asset is placed in service. 100% bonus depreciation was permanently restored for qualifying property acquired after January 19, 2025. For 2026, the Section 179 limit is $2,560,000, phasing out once purchases exceed $4,090,000. Section 179 can't exceed business income. Bonus depreciation has no income limit.

The phrase that matters is placed in service — ready and available for use. Not ordered. Not paid for. In service.

So say you have an in-house lab analyzer quoted at $40,000. Delivered, set up, and ready to run on December 18, it counts toward 2026. Sitting in a box until January 5, it belongs to 2027. Same machine. Same check. Different tax year.

Now I'll talk you out of something. A big deduction isn't automatically the right one. In a lower-income year, spreading it into higher-income years may serve you better. We run it both ways before you buy.

October 15, as a waypoint. If you extended your 2025 personal return, or your practice is a calendar-year C corp, the extended filing deadline is Thursday, October 15. Not a scare date. Once 2025 is filed, we have the cleanest picture going into the last eleven weeks of 2026.

Your 2027 S-corp decision. If your practice isn't an S corp yet, Q4 is when to decide about 2027. Form 2553 is generally due within 2 months and 15 days of the start of the tax year the election takes effect — for a calendar-year practice, that's mid-March 2027. But the decision belongs in the fall, because it changes January payroll.

When should you be an S corp? It depends — so let's replace the guesswork with a framework. The S-Corp Break-Even Calculator shows where your profit sits against the added cost of payroll and a separate return. Sometimes the answer is "not yet," and I'll say so.

What One Practice's 2025 Looked Like

Orchard Health, Dr. Jonathan Wade's practice, saved $130,294 in 2025. Of that, $82,840 came from cost segregation on two practice properties.

Cost segregation isn't one of the e-book's seven strategies. That's the point. The seven build the core; a real plan finds what's specific to your practice — in Orchard's case, the buildings.

Here's how Dr. Wade put it: "I didn't know what I didn't know... I feel heard... one of the best investments we've made."

That's the real win. Knowing where the year is going before it gets there. You can see how we work with Direct Care practices all year at /direct-care.

What Could You Do This Week?

Four things. None takes more than an afternoon.

1. Count your payrolls left and pull your year-to-date salary.
2. Submit the year's receipts and mileage under your accountable plan.
3. Schedule your 2027 planning day — at home, with an agenda and minutes.
4. Send us equipment quotes before you buy, so the in-service date is part of the plan.

All seven strategies, with the Direct Care angle for each, are in the e-book.

Download the free e-book: 7 Tax Strategies for Direct Care Practice Owners →

— Nathaniel C. Goodman, CPA, MBA

This post is for general educational purposes and isn't tax advice for your specific situation. Talk with your own advisor before acting on any strategy.