Everyone thinks of March and April as tax season, and they aren’t wrong. However, people who wait until the spring to address their federal and state taxes often miss opportunities to save significant money. Many of the best tax-reducing ideas, especially for veterinary practice owners, must be completed before the end of the current calendar year.
One of the key tenets of tax planning is defer, defer, defer. In other words, if you can push off paying taxes until next year, you can use the money that isn’t going toward taxes to pay down debt, earn interest and reinvest in your practice. Many of the ideas I discuss below are tremendous opportunities worthy of discussion with your accountant or financial adviser.
Invest in Equipment
Practice owners ask me all the time, “Should I buy equipment this year to save on taxes?” My answer is always, “Maybe.” You should buy equipment when your practice needs it to continue providing excellent veterinary care or because it will enable new services in response to client demand. In that case, saving on taxes is a fantastic financial, albeit secondary, benefit.
Before you consider purchasing equipment, ask yourself, “Is it a toy or a tool?” Your answer should depend on the specific equipment and how you will use it. Too many times, I have seen practice owners buy an ultrasound machine or therapy laser to receive a large tax deduction. They then neglect to implement the necessary training or formulate a plan to recommend or charge for the services.
I have seen my fair share of expensive coat hangers in the back rooms of veterinary practices because an owner’s focus was on tax savings rather than improving the delivery of medicine.
To be clear, buying equipment that a practice needs is an excellent tax planning tip. Often, it is best to make the purchase decision in October so that you have plenty of time to select the best medical or computer equipment for your practice. The recently enacted One Big Beautiful Bill Act reaffirmed that practice owners will receive a dollar-for-dollar deduction for investments in equipment for the foreseeable future.
Retirement Plans
There has never been a better time to start a Safe Harbor 401(k) plan. Given the currently available deductions and credits, practice owners in tax brackets higher than 24% miss out by not having one in place. Money that you contribute to the plan from your paycheck can be tax-deductible, as can Safe Harbor employer contributions and profit-sharing payments. Recent tax law changes in the Secure 2.0 Act allow businesses to move from a SIMPLE plan to a Safe Harbor 401(k) midyear.
New plans will also allow for Roth contributions, which is a great option for employees in lower tax brackets. Other benefits include tax credits for setting up automatic enrollment and for employer contributions over the first several years, which can significantly offset the business cost.
A well-designed retirement plan provides recruiting and retention benefits in addition to financial savings. I recommend working with a certified financial planner who focuses on retirement plans to ensure you design one that fits best with your age, goals and practice.
Warning: Some financial advisers do not focus on business retirement plans and will not provide the best advice on the topic. While they might say they “have a guy in my office” who does it for them, you will want a professional who specializes in retirement plans.
Pay Vendor Bills and Employee Bonuses Before Dec. 31
If (and only if) your veterinary practice files federal taxes on the cash basis of accounting, you receive a tax deduction when you pay a bill. When outstanding bills typically would be paid in January, speeding up the timing of those payments results in a tax deduction a year sooner.
Paying a vendor bill can be done by check, an electronic transfer or by charging it to the practice’s credit card. The IRS considers all those methods as “paid” for tax-deduction purposes.
Employee bonuses paid by year’s end are also deductible expenses that year. Make sure the payments go through payroll.
One Big Beautiful Bill Act
President Trump signed the federal bill into law on July 4, 2025. Because of the legislation’s immense scope, I will highlight only a few key takeaways that impact small businesses and individuals. Be sure to discuss any of these items with your tax preparer if you have questions about how they might affect you and your practice.
Business Impacts
- The pass-through entity tax (PTET) was unaffected, so there is no SALT limitation for pass-through entities. That is excellent news following early concerns that PTET would be limited or eliminated.
- The qualified business income (QBI) deduction remains at 20% and was made permanent. Practice owners are subject to income limitations. The bill increased the phaseout range for single and married taxpayers, making more people eligible to receive tax savings.
- Bonus depreciation has been phased down over the past several years. It is now permanent, and the allowance increased to 100% of property acquired and placed in service after Jan. 19, 2025.
- Employer payments of student loans under education assistance programs were made permanent and adjusted for inflation. The $5,250 maximum exclusion was set to expire after 2025.
Personal Impacts
- Tax Cuts and Jobs Act (TCJA) rates were made permanent. They were set to go up after 2025.
- The child tax credit increased to $2,200 per child. It was scheduled to revert to $1,000 after 2025.
- The estate and gift tax exemption rose to $15 million. It would have reverted to $5 million after 2025.
- The state and local tax (SALT) cap jumped from $10,000 to $40,000 for 2025 and increases 1% each year.
- Energy credits now expire at the end of 2025. These were set to continue for several years.
The recent tax act contained so many tax-planning opportunities and changes that I cannot address everything. My main takeaway for you is to start planning now. Meet with your accountant, and potentially your financial adviser, to ensure you are well-prepared for tax season.