The Ultimate Year-End Tax Planning Guide for DPC Owners

As the year winds down, Direct Primary Care (DPC) owners enter one of the most impactful financial periods of the year. The decisions you make between now and December 31st can significantly affect your tax liability, cashflow, and strategic momentum heading into 2026. Whether you are in your first year of practice or have been operating for several seasons, year-end is the ideal time to review your structure, evaluate savings strategies, and clean up financials so tax season is as smooth and predictable as possible.

Reassess Your Entity Structure

Your business structure directly impacts how your income is taxed. For many DPC owners earning $100,000 or more in net income, switching to (or validating) S-Corporation status can be a smart tax strategy. S-Corps allow owners to divide earnings into salary and shareholder distributions, an arrangement that can reduce self-employment taxes when appropriately structured.

While the S-Corp election can technically be filed after the new year, year-end is the right moment to review your current structure, look at actual 2025 performance, and decide whether an adjustment makes sense for 2026. If your tax bill felt high this year or you expect to grow next year, an entity review is especially valuable. In many cases, this single adjustment can save DPC practices $10,000–$20,000 annually.

Verify Your Owner Salary (If You’re an S-Corp)

If your practice is already operating as an S-Corporation, you are required to take a “reasonable salary” that aligns with your location, revenue, and role. This number matters because it influences both payroll taxes and your exposure to IRS scrutiny. Paying yourself too little invites compliance risk; paying too much eliminates the tax-saving benefit of the S-Corp election.

Year-end is the ideal time to confirm whether your current salary is appropriate based on your 2025 production and practice health. If adjustments are needed, they must be made before December 31st, so this is not a task to leave until filing time.

Maximize Retirement Contributions

Retirement planning is one of the most effective ways to reduce taxable income while building long-term security. DPC owners have several options, including Solo 401(k)s, SEP IRAs, and traditional IRAs. Of these, the Solo 401(k) is often the most powerful because of its higher contribution limits and flexibility.

There is one important deadline: Solo 401(k) plans must be opened by December 31st in order to make 2025 contributions. Even if you are not ready to contribute right away, opening the plan preserves the option. SEP IRAs are more flexible because both the setup and the contribution can be completed after year-end, but they may offer less value depending on your income and structure.

Confirm Eligible Deductions

DPC practices often miss eligible deductions simply because there’s uncertainty around what qualifies. Beyond the usual operational needs, many practice-specific expenses can reduce taxable income, including EMR platforms, telehealth tools, medical supplies, professional development, marketing, mileage, and even home office expenses when applicable.

Reviewing your transaction history before year-end helps ensure nothing is missed. You’ll also set yourself up for clearer reporting and a smoother experience when filing season arrives.

Evaluate Quarterly Tax Payments

If you’ve been paying estimated quarterly taxes throughout the year, now is the time to review whether those payments were sufficient. Practices that grew revenue or added patients in 2025 may find that earlier estimates no longer reflect their actual tax liability. Underpayment can lead to penalties, while overpayment restricts your cashflow.

Running a year-end tax projection helps ensure your Q4 payment is appropriate, minimizing surprises.

Prepare for 1099 Reporting

Before January 31st, you’ll need to issue 1099s to contractors, non-employee clinicians, and certain vendors. If you haven’t already gathered W-9s, now is the right time. Handling this early prevents scrambling during one of the busiest times of the year.

FAQs

1) When should a DPC elect S-Corporation status?

Most Direct Primary Care owners should consider electing S-Corporation taxation when net income reaches $100,000+ per year and the physician is actively working in the practice. S-Corp classification allows income to be split between salary and distributions, often reducing self-employment taxes.

2) How much should I pay myself as a DPC owner in an S-Corp?

If your DPC is taxed as an S-Corp, you must take a “reasonable salary” that reflects your clinical duties, time commitment, and local market rates. The IRS doesn’t provide a fixed number, but a reasonable salary generally aligns with what a physician would be paid for similar work. Remaining profits can be distributed tax-advantaged.

3) Do I need to open a Solo 401(k) before year-end to get tax benefits?

Yes. A Solo 401(k) must be established by December 31 to qualify for current-year tax benefits, even if contributions are made later. This is one of the most effective year-end strategies for DPC owners looking to reduce taxable income.

We’re Here to Help

Goodman CPA works exclusively with Direct Primary Care practices, helping owners understand their financial picture, optimize tax strategies, and make confident business decisions. If you’re ready to take action before December 31st, or simply want a better grasp of your options, we’re here to support you.

Let’s make 2026 your strongest year yet. Book a Year-End Tax Strategy Session with us.