Doctors Face 7% Tax Rate Gap Due to S Corp Ownership Benefits

Two doctors performing the same work encounter a tax rate difference exceeding 7% due to differences in business ownership structures. A doctor who owns her practice through an S corporation can achieve an effective federal tax rate below 30%, while her salaried colleague faces a 37% federal tax bracket plus an additional 0.9% Medicare tax. The tax code offers benefits like the 20% deduction on qualified business income (QBI) for pass-through entity owners but excludes high-earning doctors from deducting clinical fees. This distinction affects financial planning for many healthcare professionals, making the ownership model potentially more advantageous for tax efficiency.

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