Independent healthcare practice owners should be wary of looming changes on the horizon regarding their tax obligations. New laws proposed for 2022 should encourage that practice owners begin careful planning with their advisors in order to get in front of this change. Increases in capital gains tax, NII (net investment income) modifications, and a lowering of the brackets for high income earners are just a few. In 2021, most private practices have enjoyed a nice rebound in top-line revenue and net profit over a COVID riddled 2020, fraught with shut-downs and uncertainty. The graph below illustrates the lowering of the income tax threshold, specifically impacting high earners at $400,000 and above.
1. Folks on the cusp of $400,000 net income bracket should consider tax deductions to get them below that threshold and smart retirement planning is one of the best. It’s important to partner with a pro-active financial planner that can help with the design of your retirement plan.
2) Another change on the horizon will impact those that are an S corporation. The NII – or Net Investment Income – tax changes will result in a 3.8% tax on Schedule E, S-corporation profits. S-corporation owners were previously excluded from this tax as actively participating owners.
3) There is a Capital gains increase to 25% as top rate – impacting both investment income and those looking to sell their practice, in which the Goodwill will be recognized as capital gains.
4) The qualified business income deduction (QBI) is a tax deduction that allows eligible self-employed and small-business owners to deduct up to 20% of their qualified business income on their taxes. QBI, however, will be open to specified service trade or business -this is good! Be careful in your analysis as there will be other limitations.