September 17, 2025 • 26 mins
Questions? Thoughts? Send a Text to The Optometry Money Podcast!
Tax planning is more than just finding deductions—it’s about pulling the right financial levers at the right time. In this episode, Evon Mendrin, CFP®, walks through the five key areas of a tax return that optometrists and practice owners should focus on when working with their financial and tax professionals.
By understanding these levers, you can reduce surprises at tax time and unlock smarter planning opportunities for both your practice and your personal finances.
What You’ll Learn in This Episode:
- How to project your income trajectory for the year (and why clean bookkeeping is essential).
- Why reviewing your tax withholdings and estimated payments now can prevent big surprises later.
- The role of Adjusted Gross Income (AGI) in unlocking or losing out on credits and deductions.
- Planning strategies around itemized deductions (and how the new rules on SALT and charitable giving affect you).
- How to manage your Qualified Business Income (QBI) deduction as an optometry practice owner.
- Using your taxable income and brackets to strategically manage your overall tax liability.
- Practical ways to combine these levers—like retirement plans, charitable giving, and reinvesting in your practice—for maximum impact.
Resources & Links:
- Independent Strong: Understanding the Key Planning Levers in the Private Practice Owner’s Tax Return (Evon’s written guide)
- Connect with Evon: evon@optometrywealth.com
- Schedule a time to chat at www.optometrywealth.com
- Newsletter: Tax Changes in the 'One Big Beautiful Bill Act' ODs Need to Know
The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Evon (00:04):
Hey, everybody.
Welcome back to the OptometryMoney Podcast, where we're
helping ODs all over the countrymake better and better decisions
around their money, theircareers, and their practices.
I am your host, Evon Mendrin,Certified Financial Planner
practitioner, and owner ofOptometry Wealth Advisors, an
independent financial planningfirm just for optometrists
nationwide.
(00:24):
And thank you so much forlistening.
Appreciate your time and yourattention.
it's been a few weeks.
It's been a couple weeks sincewe put out a fresh episode,
within the practice, we're goingthrough another stage of growth
and wanting to make sure we'retaking care of the families we
are privileged to serve and ourclients.
we took a step back from thepodcast, but happy to be back
behind the mic.
(00:44):
And, uh, wanted to talk todayabout key tax planning levers
that you can think through asyou look at your practice profit
to the rest of the year, as youare talking with your own
professionals, about taxplanning through the rest of the
year, wanted, don't you sharesome things I'm seeing as I'm
going through that with my ownclients.
This is the time of year wherewe are, uh, going through those
initial tax projections withclients.
(01:05):
I, I've projected out the profitand loss, expected profit and
loss throughout the rest of theyear.
I, I've gone through that withclients who I'm communicating,
working closely with their taxprofessionals.
Ultimately to see where are theopportunities to either improve
on or solidify our tax planning.
As I've gone through those withour clients wanted, don't you
share some things that I'mseeing.
(01:26):
and some key opportunities, keytax planning levers that you can
consider for your own taxplanning.
Because if you look at the flowof a tax return, for example,
and for us, when we look atthose projections, there are
certain key areas of that taxreturn that when we aim for
those key areas, when we, whenwe pull certain specific levers,
can have a really high impact onultimately the result.
(01:49):
And so this is gonna take a,this episode is gonna take a a
higher level overview at thosekey planning areas and.
And we often just want to talkabout the strategies, right?
What are the fun, excitingstrategies?
What are the tactics?
What magic ways can we get thosedeductions?
That's usually what we wannatalk about, but I think it's
useful to take a step back andsay, okay, what are we really
planning around?
(02:10):
It, it may not make sense tojust pile and pile on deductions
in one tax year or pile and pileon tax deferral into one tax
year or depreciation in one taxyear We really wanna take a look
at our, our tax plan and say,well, what are we targeting and
what are we actually planningaround?
And once we have an idea ofthat, you can then turn to,
(02:31):
okay, what are our tactics?
What are our certain deductionswe're gonna use?
And things like that in order toget those results.
And so those are the things Iwanna talk about today.
and before I do that, I wantedto say if you are planning to
head to Vision Expo this week.
I will be there on Thursday andFriday.
Would love to connect with you,talk to you about what's going
on in your life and in yourpractice.
(02:51):
And, if you'd like to connect inperson, you can always reach me
here at Evon,evon@optometrywealth.com.
Uh, would be great to see youthere, but let's dive into tax
planning and one of the firstthings we want to project out
and get a pretty good grasp onis our income trajectory for the
year.
And what are the different typesof income that we're planning
around?
There's probably going to bebusiness profit if you are in a
(03:14):
practice, if your practice istaxed as an S corporation,
there's gonna be a wage for you,potentially your spouse as well.
do you own real estate?
Is there going to be rentalincome or losses?
Is it commercial real estateconnected to the practice or
short-term rental, or is it a, along-term passive rental?
are there taxable brokerageaccounts?
(03:35):
And what kind of income anddividends and interest are those
brokerage accounts?
going to be kicking off and haveyou sold large assets?
Are there gonna be capital gainseither from those investment
accounts, from selling a rentalproperty, from selling a home,
higher than the, the exclusionamount?
And so we wanna get a good feelfor what type and what amount of
income we are reasonablyprojecting out throughout the
(03:57):
rest of the year.
And obviously with an Optometrypractice there, how the rest of
the year unfolds isn't set instone.
That's something we have toproject out and use reasonable
assumptions, including thingslike seasonality so these
projections are always sort ofliving, breathing projections,
right?
We wanna update them as the yeargoes on, but wanna at least get
(04:17):
a reasonable feel for what ourincome's gonna look like this
year.
And a really important notehere, one thing that's really
important is clean, accuratebookkeeping in your practice.
And if you don't have clean,accurate bookkeeping, if you
don't have any bookkeepingsoftware and you're just sending
your accountants all thereceipts and everything at the
end of the year for taxpurposes.
(04:39):
It's really difficult to do anytype of, proactive planning
around taxes, or I would addeven cashflow in the business.
You really want to have clean,accurate bookkeeping in the
practice, and that's updated ona regular basis, so you can make
accurate projections and makegood decisions based on that
data.
And so now that we've gonethrough that exercise of putting
(05:02):
all the income building blockstogether, we have a good feel
for what that income andExpenses are gonna look like
through the rest of the year.
Now we can talk about our firstsort of planning lever, planning
opportunity, and that is yourtax withholdings and estimated
payments.
And this is, could look a coupleof ways.
So for example, if you are theowner of an S corporation,
(05:23):
you're gonna see a wage, andthat wage is going to be
withholding federal taxpayments, and potentially state
tax, uh, withholdings as well,depending on the state that
you're in.
And in addition to those payrollwithholdings, you may also be
paying quarterly estimated taxpayments.
At this point.
You've already likely made, thefirst three payments, uh,
September 15th was the mostrecent one, and now we're
(05:46):
talking about January.
January 15th is the next one.
And so once we've projected outsort of the tax projection for
the year, we wanna get a look atwhere are our tax payments,
what's the trajectory of taxwithholdings, and are we on
track?
We wanna know that yourwithholdings and estimated
payments are on the sametrajectory, on the same track
(06:07):
with our total tax we'reprojecting or are we expecting a
substantial tax due, at taxtime?
Or are we expecting asubstantial refund due at tax
time?
This isn't the most exciting orglamorous form of planning, but
one of the biggest frustrationfor many clients I, I talk with
are surprises at tax time.
(06:28):
And one of the easiest ways tobring down the stress of tax
time is to at least get yourwithholdings and estimated tax
payments on track for what weexpect that total tax to be.
And ultimately our goal is justno surprises.
And so there's a couple targetsyou might aim for with, for
withholdings.
the first target are the safeharbor rules, meaning the IRS
says if you withhold or paying acertain amount throughout the
(06:49):
year, uh, they won't, they won'tapply under withholding
penalties.
And there's two versions of theSafe Harbor rules.
Number one is if you withhold atleast 90% of this year's total
tax, you won't have to pay anunder withholding penalty.
The second version is if youwithhold at least 110% of last
year's total tax.
(07:10):
You won't be subject to thatpenalty.
So it's either gonna be based onthis year's total tax or last
year's total tax.
And for the most part, if youexpect your taxable income to be
roughly the same or higher, uh,than it was last year, you're
probably going to want to usethat 110% of last year's total
tax.
In fact, a lot of the estimatedtax payments that are suggested
(07:31):
on those tax returns each yearare gonna be based on that safe
harbor amount.
But if you know your income'sgonna be much lower this year,
if you know your, for example,your practice profit's gonna be
much lower this year.
Uh, one client, for example ofours, they lost in an associate
doctors.
total doctor hours came down.
They, they were gonna see lowerrevenue and profit for this
(07:51):
year.
So that's one example.
If you know your taxableincome's gonna be lower this
year than it was last year,maybe you're gonna use that 90%,
uh, of current tax.
So one target's gonna be one ofthose safe harbor rules just to
avoid that under withholdingtax.
And of course that secondtarget's gonna be as close as
possible to the anticipated taxdue at tax time.
(08:13):
Or at least saving up enoughdollars to get you to that point
at tax time.
So number one, reviewing yourtax withholdings.
You're reviewing your taxpayments, making sure we are on
the right track so that there'sno surprises in April.
And it's not as painful as itmight be.
The next thing we wanna look atis your adjusted gross income,
(08:35):
which that's a, a tax jargonterm.
What that means, essentially, ifyou look at your tax return,
it's all of your sources ofincome minus a bunch of
deductions.
And, this adjusted gross income,AGI is a really important
planning line item because itimpacts your eligibility for
certain deductions and creditsas well as additional taxes.
(08:56):
So, for example, uh, the childtax credit, which is a dollar
for dollar offset of the taxesthat are due, the child tax
credit is$2,200 this year foreach qualifying child under age
17.
that child tax credit beginsphasing out at$200,000 of AGI if
(09:17):
you are single or$400,000 if youare married, filing jointly.
And so once you start to get tothose ranges of AGI, that child
tax credit begins to phasedownward and so that's an
important opportunity we wannaplan around.
If your adjusted gross income,if you are married, finally
jointly is$250,000 or higher,and you have any investment
(09:37):
income, like capital gains,dividends, interest, things like
that, that investment incomestarts to become subject to the
3.8% net investment income tax.
it's also really important forstudent loan planning because
AGII is the default way thatincome-driven repayment plans,
calculate their payments for thenext 12 months.
And if you are usingincome-driven plans towards
(10:00):
forgiveness, that IDR payment isessentially a 10 or 15% tax on
much of your income.
That adjusted gross income isreally important for student
loan planning as well.
So we wanna keep a really closeeye on this and what we might
want to target, for example, wemight wanna look at AGI and say,
okay, are we phasing out of thechild tax credit?
(10:22):
For example, what is ouradjusted gross income expected
to be?
And what are we phasing out of?
Because that becomes a target wecan plan around.
We can try to bring down thatAGI number in order to phase
into again, for example, thatchild tax credit.
and when planning around this,it's important to look at which
deductions or tax deferralsdirectly impact the adjuster
(10:46):
gross income number.
Many deductions do help to lowerthat, but there are other
deductions that are below thaton the tax return.
And so we want to prioritize,for this, Things that are 401k
contributions, for example, orsimple IRA contributions, HSA
contributions, health insurance,uh, self-employed health
insurance, premium deductions,for example.
(11:08):
Business deductions or, ordepreciation on real estate, for
example.
Those are all examples of, ofdeductions and tax deferrals
that directly lower adjustedgross income.
And so those are the things wemight want to prioritize when
trying to plan around that.
an example of something that isa deduction but doesn't lower
(11:29):
that adjusted gross incomenumber on the tax return is the
standard deduction or itemizeddeductions, which leads us to
the next planning lever.
Number three, itemizeddeductions.
And, in every taxpayer, if youlook at your tax return, if you
look at the way taxes work,every taxpayer can choose
between a standard deductionamount.
(11:50):
Or you can stack up a list ofitemized personal expenses.
And if that list is higher thanthe standard deduction amount,
then you can take that list ofitemized deductions.
for 2025, the, the standarddeduction amount is 15,750 if
you are single or married,filing separately, or 31,500 if
(12:12):
you're married, filing jointly.
And so that's sort of our targetthere with itemized deductions.
there are.
And what's on that list?
Well, it's it's mortgageinterest expense.
Uh, well, it's mortgage interestexpense.
It's charitable contributions,donations to nonprofits,
charities, churches, state andlocal taxes, certain Healthcare
(12:33):
expenses.
And so those are the expenseswe're looking at.
And there's a couple reallyimportant, One Big Beautiful
Bill Act updates that we wannatake into account for this year
when planning around itemizeddeductions.
Number one is the increase inthe cap for the state and local
tax deduction.
from 2018 to now the amount ofstate and local taxes that you
(12:54):
can take as an itemizeddeduction was capped at$10,000,
which severely capped you if youlived in a high state tax state
like California, potentially NewYork, New Jersey, and as a
result of the One Big BeautifulBill Act that was recently
passed this year.
That state and local tax capdeduction cap has increased from
(13:15):
$10,000 up to$40,000.
However, that increased capbegins to phase down for higher
earners once your, What'seffectively your adjusted gross
income gets to 500,000, and sothat 500,000 to$600,000 of
income, that range becomes areally important, really
(13:38):
important planning range basedon how that higher deduction
phases down.
It never gets below$10,000.
But that a hundred thousanddollars of income if you're
married, filing jointly, can bevery expensive because of the
way that phase is down.
So that increased state andlocal tax cap is something we're
keeping an eye on for thosehigher earning, mostly practice
(13:58):
owners within that income range.
The second thing we're lookingat are charitable deductions.
Because the rules for charitabledeductions didn't change for
this year, but did change fornext year.
one of the things that changesthat there is a charitable
deduction available, whether youitemize your taxes or not.
It's, it's small, it's limited,but there is going to be
(14:18):
something available next yeareven if you don't itemize your
taxes.
So we're gonna have to startkeeping receipts again, you
know, for, for those charitablecontributions.
But the other thing that changedis that starting in 2026,
there's an AGI floor that yourdonations to charity has to get
through order for them to bedeductible.
(14:41):
So starting in 2026, there was ahalf of a percent AGI floor,
meaning that your deductionshave to be more than a half a
percent of your adjusted grossincome.
And once they get beyond a halfa percent, then they actually
start to get deductible.
For example, if your AGI is$300,000, a half a percent of
(15:04):
that would be$1,500.
And so the first$1.500 of yourdonations aren't actually going
to be deductible.
It's everything above that.
So this is the last year to maketho those donations without
being subject to the AGI floor.
And if your AGI is.
Relatively high.
Well, that's a higher floor thatyou have to get to in the next
year and beyond.
In general, you know, due to thehigher standard deduction
(15:25):
amount, uh, what we've seen workvery often are bunching
charitable donations into.
Like every other year or everythird year, for example, in
order to get those itemizeddeductions higher than that
standard deduction amount.
That's something that probablystill makes sense moving forward
since the standard deduction hasbeen made, quote unquote,
(15:46):
permanently higher.
And so, whether that's donatingdirectly to the nonprofit or
charity or church.
Or donating to a donor advisedfund.
I think that that those bunchingof charitable contributions
continues to be something wewant to keep an eye on moving
forward.
And so those itemized deductionsare something we want to, to
take a look at and plan around.
(16:06):
Are you going to be hittingthose phase outs for the state
and local tax deduction cap?
what are your charitablecontributions or are they going
to be high enough?
Should we accelerate maybe nextyear or the next two years into
this year and bunch'em togetherin order to make them, useful
from a tax planning perspective?
The next lever we're looking atis the qualified business income
(16:26):
tax deduction.
And this is a 20% deduction for,for you business owners, PR and
practice owners that own a passthrough business.
So if your business is a soleproprietorship or taxed as a
sole proprietorship, if it'staxed as a partnership or an S
corporation.
That's you, you're eligible forthis.
And this is a 20% deduction ofwhat's effectively net operating
(16:49):
income of the business.
And for Optometry.
Optometry generally is what theIRS calls a specified service
business.
Uh, which means that once yourtaxable income, before the
deduction.
Reaches certain thresholds, youstart to phase out of the QBI
deduction, meaning you start tolittle by little, be eligible
(17:10):
for less and less of it, andthen once your taxable income
before that deduction gets to acertain higher threshold, then
you phase out of it altogether,which can be substantial
depending on the profit of thepractice.
So.
In 2025, the thresholds, ifyou're single, are$197,300 and
you have$50,000 of income untilyou hit the top threshold.
(17:34):
Uh, so that top part's$247,300,and if you're married filing
jointly, that threshold startsat taxable income of$394,600,
and you have a hundred thousandto go until you hit that top
threshold of$494,600.
And so those are the rangeswe're planning around when we
look at this QBI deduction, thisis a really important lever we
(17:54):
wanna look at, are we phasingout of it, and are there
opportunities to bring down thattaxable income in order to phase
you back into it more and more.
And then lastly, we're lookingat taxable income.
And this is obviously importantbecause of that qualified
business income deduction wetalked about.
but also it's important becausetaxable income determines the
actual tax rates your income'sgonna be tax at, taxable income
(18:16):
is what goes through those taxbrackets to figure out what is
your tax due.
And so that tells us, okay, whatis your marginal tax rate?
Meaning the, the, the tax ratethat your last or highest
dollars of income are gonna betaxed at?
Is it gonna be 10%, 12%, 22, 24,32, 35, and so on and so forth.
(18:37):
And it's the same thing forcapital gains type income.
So if you have long-term capitalgains, meaning you've sold an
investment asset that you'veowned for longer than a year, or
if you have a type of dividendcalled qualified dividends.
Those are gonna be taxed at 0%,15% and 20%.
And whatever that tax rate is,it's gonna be determined by your
(18:57):
taxable income.
And so if we can look atopportunities to bring down that
taxable income to potentiallybring you into a lower tax
bracket, for example, maybe, outof the 32% and into the 24.% Or
if we can help keep you out ofthe next tax bracket, for
example, avoiding that 8% jumpfrom 24% to 32%.
(19:19):
We wanna look at opportunitiesto do that and manage those tax
brackets appropriately.
Same thing for capital gains.
Hey, if we can get you out ofthe 15% and into the 0%, like
that's, that's phenomenal,right?
We wanna look for opportunitiesto do that.
And so those are sort of thebiggest opportunities for
planning that I'm seeing as I'mgoing through these tax
projections with clients, havingthese conversations with clients
(19:40):
and their tax professionals.
It's going to be first getting afeel for the income trajectory
and what are the different typesand amounts of income we're
gonna be working with.
And then looking at withholdingsand estimated payments.
Are we on track?
Do we need to make adjustments?
Well, we still have time to doso.
looking at adjusted grossincome.
Looking at are we phasing out ofanything and what can we do to
(20:02):
bring down that adjusted grossincome number to phase us back
into those things.
Looking at itemized deductions,is there planning opportunities
with itemized deductions tobring them above and beyond the
standard deduction amount?
And then looking at things likethat state and local tax cap and
charitable contributions.
Then looking at the QBIdeduction, are we phasing out of
(20:23):
that?
And can we phase you back intothat?
And then lastly, looking at yourtaxable income and managing our
tax brackets, are thereopportunities to bring you into
more favorable tax brackets?
Or other opportunities to keepyou out of an additional tax
bracket.
And the fascinating thing is,when you start to look at these
things together, your potentialdeductions or tax deferrals can
(20:47):
have potentially a much higherimpact than just the marginal
tax bracket that you're in.
And what I mean by that is thatvery often we'll see that, okay,
if you are in the 32% taxbracket, if you get a$10,000
deduction, you are thinking,okay, you're saving 32% of
$10,000, which is gonna be$3,200.
(21:08):
Right?
That's, that's kind of whatwe're thinking.
You're saving 32% on thatdeduction.
However, when we combine thesedifferent tax planning levers
together, we can see that adeduction can lead to a much
higher effective tax savings,like an effective tax rate than
just that marginal tax rate thatyou're in.
(21:29):
If you're able to, for example,if you're able to bring down
your adjusted gross income andbring down that taxable income.
You may be able to do severalthings at once.
You may be able to phase into ahigher child tax credit you,
which will offset dollar fordollar the tax that's due.
May be able to increase your QBIdeduction, which lowers your
(21:51):
taxable income, you may be ableto increase those itemized
deductions, which lowers thattaxable income.
So if you pull several of theselevers at once, a$10,000
deduction, for example, may havea$20,000 decrease in taxable
income, and a very healthy,effective tax rate you're saving
(22:11):
at Now I'm just throwing outexamples, right?
That's that's, that's not basedon any specific example I, I've
been looking at.
But that's, that's sort of theconcept.
When you can pull several ofthese levers together, you can
have a much larger impact thanjust that marginal tax bracket
you're looking at.
And so those are someopportunities you can start to
think about as you are havingthese these conversations with
your financial professionals.
(22:32):
As you're having theseconversations with your tax
professionals, you can, you canlook at these different
opportunities, these differentlevers, and ask yourself, Hey.
What are the types of income I'mworking with?
Are we phasing out of anythingthat we can try to phase back
into?
are we phasing into anyadditional taxes that we can try
to phase out of?
(22:52):
Where are these opportunitiesand levers to pull?
And how do you do that?
Well, that's where thoseconversations become really
important because you can seewhat are the opportunities that
are specific to you, right?
You ultimately, you want to geta projection done by your
professionals and look at theopportunities that are specific
to you.
It's gonna be, generallyspeaking, some combination of
(23:13):
planning in the business,looking at opportunities to
reinvest in the businesspotentially.
For example, especially as weget into Vision Expo, buying
equipment that has a truebusiness use and a return on
investment, or whatever it maybe, reinvesting back into the
practice and using thoseexpenses as tax deductions or
using depreciation.
(23:33):
or it could be other things likeif your kids can, can
legitimately do work in thepractice, maybe you can add your
children to payroll and, and usethat as an opportunity for tax
planning as well.
So it's gonna be someopportunity of planning in the
business.
Or evaluating the businessentity.
Depreciation planning aroundreal estate, especially if
you're buying the commercialreal estate of your practice or
(23:55):
a or if you own a short termrental and you follow the short
term rental rules, because taxlosses from that type of real
estate may be used to offset allof your other active type
income, like practice profit.
And especially now that the OneBig Beautiful Bill Act
reintroduced a hundred percentbonus depreciation.
and that can potentially becombined with a cost segregation
(24:16):
study and, and that real estate,that's another potential
opportunity to use there.
It could be using retirementaccounts, so using your 401k in
the practice, for example.
and that's not only the employeecontributions, but also profit
sharing contributions if thecash flow and the demographics
of the practice makes sense.
For very mature, very heavilycash flowing practices, maybe a
(24:39):
cash balance plan, if that makessense.
So looking at your retirementplan and asking, can we get the
most outta this retirement plan?
Maybe it's time to switch from asimple IRA over to that 401k
plan now that we can do thatmidyear.
Or it could be using charitablecontributions as we talked about
using, for example,donor-advised funds to bunch
those contributions in thecurrent year, benefit from that
(25:00):
tax planning and then, and thenactually make those donations
over the coming years outta thatdonor-advised fund.
Those are some general sort ofcategories you might think
around, but ultimately it comesdown to.
What do your own professionalsadvise?
It's going through thatprojection with your own, your
own professionals.
Having those conversations withyour own financial and tax
professionals.
And if you aren't, reach out.
(25:22):
Would love to start theseconversations.
We're getting into the end ofthe year, right?
We're getting into the fourthquarter.
Pretty soon it's time to startthinking about tax planning for
the year and seeing whatopportunities are ahead of us.
And in addition, one thing I'lllink to in the show notes is an
article I did for IndependentStrong, all about these key tax
planning levers for practiceowners and so that'll be
something you can find in theshow notes.
(25:43):
let me know if you have anyquestions.
You can reach me here at Evon,evon@optometrywealth.com.
Uh, if you wanna talk about whatwe've talked about today on the
podcast or if you just wannachat in person at Vision Expo.
Always happy to have aconversation, and appreciate
your time we will catch you onthe next episode.
In the meantime, take care.
Hey, everybody.
Welcome back to the OptometryMoney Podcast, where we're
helping ODs all over the countrymake better and better decisions
around their money, theircareers, and their practices.
I am your host, Evon Mendrin,Certified Financial Planner
practitioner, and owner ofOptometry Wealth Advisors, an
independent financial planningfirm just for optometrists
nationwide.
(00:24):
And thank you so much forlistening.
Appreciate your time and yourattention.
it's been a few weeks.
It's been a couple weeks sincewe put out a fresh episode,
within the practice, we're goingthrough another stage of growth
and wanting to make sure we'retaking care of the families we
are privileged to serve and ourclients.
we took a step back from thepodcast, but happy to be back
behind the mic.
(00:44):
And, uh, wanted to talk todayabout key tax planning levers
that you can think through asyou look at your practice profit
to the rest of the year, as youare talking with your own
professionals, about taxplanning through the rest of the
year, wanted, don't you sharesome things I'm seeing as I'm
going through that with my ownclients.
This is the time of year wherewe are, uh, going through those
initial tax projections withclients.
(01:05):
I, I've projected out the profitand loss, expected profit and
loss throughout the rest of theyear.
I, I've gone through that withclients who I'm communicating,
working closely with their taxprofessionals.
Ultimately to see where are theopportunities to either improve
on or solidify our tax planning.
As I've gone through those withour clients wanted, don't you
share some things that I'mseeing.
(01:26):
and some key opportunities, keytax planning levers that you can
consider for your own taxplanning.
Because if you look at the flowof a tax return, for example,
and for us, when we look atthose projections, there are
certain key areas of that taxreturn that when we aim for
those key areas, when we, whenwe pull certain specific levers,
can have a really high impact onultimately the result.
(01:49):
And so this is gonna take a,this episode is gonna take a a
higher level overview at thosekey planning areas and.
And we often just want to talkabout the strategies, right?
What are the fun, excitingstrategies?
What are the tactics?
What magic ways can we get thosedeductions?
That's usually what we wannatalk about, but I think it's
useful to take a step back andsay, okay, what are we really
planning around?
(02:10):
It, it may not make sense tojust pile and pile on deductions
in one tax year or pile and pileon tax deferral into one tax
year or depreciation in one taxyear We really wanna take a look
at our, our tax plan and say,well, what are we targeting and
what are we actually planningaround?
And once we have an idea ofthat, you can then turn to,
(02:31):
okay, what are our tactics?
What are our certain deductionswe're gonna use?
And things like that in order toget those results.
And so those are the things Iwanna talk about today.
and before I do that, I wantedto say if you are planning to
head to Vision Expo this week.
I will be there on Thursday andFriday.
Would love to connect with you,talk to you about what's going
on in your life and in yourpractice.
(02:51):
And, if you'd like to connect inperson, you can always reach me
here at Evon,evon@optometrywealth.com.
Uh, would be great to see youthere, but let's dive into tax
planning and one of the firstthings we want to project out
and get a pretty good grasp onis our income trajectory for the
year.
And what are the different typesof income that we're planning
around?
There's probably going to bebusiness profit if you are in a
(03:14):
practice, if your practice istaxed as an S corporation,
there's gonna be a wage for you,potentially your spouse as well.
do you own real estate?
Is there going to be rentalincome or losses?
Is it commercial real estateconnected to the practice or
short-term rental, or is it a, along-term passive rental?
are there taxable brokerageaccounts?
(03:35):
And what kind of income anddividends and interest are those
brokerage accounts?
going to be kicking off and haveyou sold large assets?
Are there gonna be capital gainseither from those investment
accounts, from selling a rentalproperty, from selling a home,
higher than the, the exclusionamount?
And so we wanna get a good feelfor what type and what amount of
income we are reasonablyprojecting out throughout the
(03:57):
rest of the year.
And obviously with an Optometrypractice there, how the rest of
the year unfolds isn't set instone.
That's something we have toproject out and use reasonable
assumptions, including thingslike seasonality so these
projections are always sort ofliving, breathing projections,
right?
We wanna update them as the yeargoes on, but wanna at least get
(04:17):
a reasonable feel for what ourincome's gonna look like this
year.
And a really important notehere, one thing that's really
important is clean, accuratebookkeeping in your practice.
And if you don't have clean,accurate bookkeeping, if you
don't have any bookkeepingsoftware and you're just sending
your accountants all thereceipts and everything at the
end of the year for taxpurposes.
(04:39):
It's really difficult to do anytype of, proactive planning
around taxes, or I would addeven cashflow in the business.
You really want to have clean,accurate bookkeeping in the
practice, and that's updated ona regular basis, so you can make
accurate projections and makegood decisions based on that
data.
And so now that we've gonethrough that exercise of putting
(05:02):
all the income building blockstogether, we have a good feel
for what that income andExpenses are gonna look like
through the rest of the year.
Now we can talk about our firstsort of planning lever, planning
opportunity, and that is yourtax withholdings and estimated
payments.
And this is, could look a coupleof ways.
So for example, if you are theowner of an S corporation,
(05:23):
you're gonna see a wage, andthat wage is going to be
withholding federal taxpayments, and potentially state
tax, uh, withholdings as well,depending on the state that
you're in.
And in addition to those payrollwithholdings, you may also be
paying quarterly estimated taxpayments.
At this point.
You've already likely made, thefirst three payments, uh,
September 15th was the mostrecent one, and now we're
(05:46):
talking about January.
January 15th is the next one.
And so once we've projected outsort of the tax projection for
the year, we wanna get a look atwhere are our tax payments,
what's the trajectory of taxwithholdings, and are we on
track?
We wanna know that yourwithholdings and estimated
payments are on the sametrajectory, on the same track
(06:07):
with our total tax we'reprojecting or are we expecting a
substantial tax due, at taxtime?
Or are we expecting asubstantial refund due at tax
time?
This isn't the most exciting orglamorous form of planning, but
one of the biggest frustrationfor many clients I, I talk with
are surprises at tax time.
(06:28):
And one of the easiest ways tobring down the stress of tax
time is to at least get yourwithholdings and estimated tax
payments on track for what weexpect that total tax to be.
And ultimately our goal is justno surprises.
And so there's a couple targetsyou might aim for with, for
withholdings.
the first target are the safeharbor rules, meaning the IRS
says if you withhold or paying acertain amount throughout the
(06:49):
year, uh, they won't, they won'tapply under withholding
penalties.
And there's two versions of theSafe Harbor rules.
Number one is if you withhold atleast 90% of this year's total
tax, you won't have to pay anunder withholding penalty.
The second version is if youwithhold at least 110% of last
year's total tax.
(07:10):
You won't be subject to thatpenalty.
So it's either gonna be based onthis year's total tax or last
year's total tax.
And for the most part, if youexpect your taxable income to be
roughly the same or higher, uh,than it was last year, you're
probably going to want to usethat 110% of last year's total
tax.
In fact, a lot of the estimatedtax payments that are suggested
(07:31):
on those tax returns each yearare gonna be based on that safe
harbor amount.
But if you know your income'sgonna be much lower this year,
if you know your, for example,your practice profit's gonna be
much lower this year.
Uh, one client, for example ofours, they lost in an associate
doctors.
total doctor hours came down.
They, they were gonna see lowerrevenue and profit for this
(07:51):
year.
So that's one example.
If you know your taxableincome's gonna be lower this
year than it was last year,maybe you're gonna use that 90%,
uh, of current tax.
So one target's gonna be one ofthose safe harbor rules just to
avoid that under withholdingtax.
And of course that secondtarget's gonna be as close as
possible to the anticipated taxdue at tax time.
(08:13):
Or at least saving up enoughdollars to get you to that point
at tax time.
So number one, reviewing yourtax withholdings.
You're reviewing your taxpayments, making sure we are on
the right track so that there'sno surprises in April.
And it's not as painful as itmight be.
The next thing we wanna look atis your adjusted gross income,
(08:35):
which that's a, a tax jargonterm.
What that means, essentially, ifyou look at your tax return,
it's all of your sources ofincome minus a bunch of
deductions.
And, this adjusted gross income,AGI is a really important
planning line item because itimpacts your eligibility for
certain deductions and creditsas well as additional taxes.
(08:56):
So, for example, uh, the childtax credit, which is a dollar
for dollar offset of the taxesthat are due, the child tax
credit is$2,200 this year foreach qualifying child under age
17.
that child tax credit beginsphasing out at$200,000 of AGI if
(09:17):
you are single or$400,000 if youare married, filing jointly.
And so once you start to get tothose ranges of AGI, that child
tax credit begins to phasedownward and so that's an
important opportunity we wannaplan around.
If your adjusted gross income,if you are married, finally
jointly is$250,000 or higher,and you have any investment
(09:37):
income, like capital gains,dividends, interest, things like
that, that investment incomestarts to become subject to the
3.8% net investment income tax.
it's also really important forstudent loan planning because
AGII is the default way thatincome-driven repayment plans,
calculate their payments for thenext 12 months.
And if you are usingincome-driven plans towards
(10:00):
forgiveness, that IDR payment isessentially a 10 or 15% tax on
much of your income.
That adjusted gross income isreally important for student
loan planning as well.
So we wanna keep a really closeeye on this and what we might
want to target, for example, wemight wanna look at AGI and say,
okay, are we phasing out of thechild tax credit?
(10:22):
For example, what is ouradjusted gross income expected
to be?
And what are we phasing out of?
Because that becomes a target wecan plan around.
We can try to bring down thatAGI number in order to phase
into again, for example, thatchild tax credit.
and when planning around this,it's important to look at which
deductions or tax deferralsdirectly impact the adjuster
(10:46):
gross income number.
Many deductions do help to lowerthat, but there are other
deductions that are below thaton the tax return.
And so we want to prioritize,for this, Things that are 401k
contributions, for example, orsimple IRA contributions, HSA
contributions, health insurance,uh, self-employed health
insurance, premium deductions,for example.
(11:08):
Business deductions or, ordepreciation on real estate, for
example.
Those are all examples of, ofdeductions and tax deferrals
that directly lower adjustedgross income.
And so those are the things wemight want to prioritize when
trying to plan around that.
an example of something that isa deduction but doesn't lower
(11:29):
that adjusted gross incomenumber on the tax return is the
standard deduction or itemizeddeductions, which leads us to
the next planning lever.
Number three, itemizeddeductions.
And, in every taxpayer, if youlook at your tax return, if you
look at the way taxes work,every taxpayer can choose
between a standard deductionamount.
(11:50):
Or you can stack up a list ofitemized personal expenses.
And if that list is higher thanthe standard deduction amount,
then you can take that list ofitemized deductions.
for 2025, the, the standarddeduction amount is 15,750 if
you are single or married,filing separately, or 31,500 if
(12:12):
you're married, filing jointly.
And so that's sort of our targetthere with itemized deductions.
there are.
And what's on that list?
Well, it's it's mortgageinterest expense.
Uh, well, it's mortgage interestexpense.
It's charitable contributions,donations to nonprofits,
charities, churches, state andlocal taxes, certain Healthcare
(12:33):
expenses.
And so those are the expenseswe're looking at.
And there's a couple reallyimportant, One Big Beautiful
Bill Act updates that we wannatake into account for this year
when planning around itemizeddeductions.
Number one is the increase inthe cap for the state and local
tax deduction.
from 2018 to now the amount ofstate and local taxes that you
(12:54):
can take as an itemizeddeduction was capped at$10,000,
which severely capped you if youlived in a high state tax state
like California, potentially NewYork, New Jersey, and as a
result of the One Big BeautifulBill Act that was recently
passed this year.
That state and local tax capdeduction cap has increased from
(13:15):
$10,000 up to$40,000.
However, that increased capbegins to phase down for higher
earners once your, What'seffectively your adjusted gross
income gets to 500,000, and sothat 500,000 to$600,000 of
income, that range becomes areally important, really
(13:38):
important planning range basedon how that higher deduction
phases down.
It never gets below$10,000.
But that a hundred thousanddollars of income if you're
married, filing jointly, can bevery expensive because of the
way that phase is down.
So that increased state andlocal tax cap is something we're
keeping an eye on for thosehigher earning, mostly practice
(13:58):
owners within that income range.
The second thing we're lookingat are charitable deductions.
Because the rules for charitabledeductions didn't change for
this year, but did change fornext year.
one of the things that changesthat there is a charitable
deduction available, whether youitemize your taxes or not.
It's, it's small, it's limited,but there is going to be
(14:18):
something available next yeareven if you don't itemize your
taxes.
So we're gonna have to startkeeping receipts again, you
know, for, for those charitablecontributions.
But the other thing that changedis that starting in 2026,
there's an AGI floor that yourdonations to charity has to get
through order for them to bedeductible.
(14:41):
So starting in 2026, there was ahalf of a percent AGI floor,
meaning that your deductionshave to be more than a half a
percent of your adjusted grossincome.
And once they get beyond a halfa percent, then they actually
start to get deductible.
For example, if your AGI is$300,000, a half a percent of
(15:04):
that would be$1,500.
And so the first$1.500 of yourdonations aren't actually going
to be deductible.
It's everything above that.
So this is the last year to maketho those donations without
being subject to the AGI floor.
And if your AGI is.
Relatively high.
Well, that's a higher floor thatyou have to get to in the next
year and beyond.
In general, you know, due to thehigher standard deduction
(15:25):
amount, uh, what we've seen workvery often are bunching
charitable donations into.
Like every other year or everythird year, for example, in
order to get those itemizeddeductions higher than that
standard deduction amount.
That's something that probablystill makes sense moving forward
since the standard deduction hasbeen made, quote unquote,
(15:46):
permanently higher.
And so, whether that's donatingdirectly to the nonprofit or
charity or church.
Or donating to a donor advisedfund.
I think that that those bunchingof charitable contributions
continues to be something wewant to keep an eye on moving
forward.
And so those itemized deductionsare something we want to, to
take a look at and plan around.
(16:06):
Are you going to be hittingthose phase outs for the state
and local tax deduction cap?
what are your charitablecontributions or are they going
to be high enough?
Should we accelerate maybe nextyear or the next two years into
this year and bunch'em togetherin order to make them, useful
from a tax planning perspective?
The next lever we're looking atis the qualified business income
(16:26):
tax deduction.
And this is a 20% deduction for,for you business owners, PR and
practice owners that own a passthrough business.
So if your business is a soleproprietorship or taxed as a
sole proprietorship, if it'staxed as a partnership or an S
corporation.
That's you, you're eligible forthis.
And this is a 20% deduction ofwhat's effectively net operating
(16:49):
income of the business.
And for Optometry.
Optometry generally is what theIRS calls a specified service
business.
Uh, which means that once yourtaxable income, before the
deduction.
Reaches certain thresholds, youstart to phase out of the QBI
deduction, meaning you start tolittle by little, be eligible
(17:10):
for less and less of it, andthen once your taxable income
before that deduction gets to acertain higher threshold, then
you phase out of it altogether,which can be substantial
depending on the profit of thepractice.
So.
In 2025, the thresholds, ifyou're single, are$197,300 and
you have$50,000 of income untilyou hit the top threshold.
(17:34):
Uh, so that top part's$247,300,and if you're married filing
jointly, that threshold startsat taxable income of$394,600,
and you have a hundred thousandto go until you hit that top
threshold of$494,600.
And so those are the rangeswe're planning around when we
look at this QBI deduction, thisis a really important lever we
(17:54):
wanna look at, are we phasingout of it, and are there
opportunities to bring down thattaxable income in order to phase
you back into it more and more.
And then lastly, we're lookingat taxable income.
And this is obviously importantbecause of that qualified
business income deduction wetalked about.
but also it's important becausetaxable income determines the
actual tax rates your income'sgonna be tax at, taxable income
(18:16):
is what goes through those taxbrackets to figure out what is
your tax due.
And so that tells us, okay, whatis your marginal tax rate?
Meaning the, the, the tax ratethat your last or highest
dollars of income are gonna betaxed at?
Is it gonna be 10%, 12%, 22, 24,32, 35, and so on and so forth.
(18:37):
And it's the same thing forcapital gains type income.
So if you have long-term capitalgains, meaning you've sold an
investment asset that you'veowned for longer than a year, or
if you have a type of dividendcalled qualified dividends.
Those are gonna be taxed at 0%,15% and 20%.
And whatever that tax rate is,it's gonna be determined by your
(18:57):
taxable income.
And so if we can look atopportunities to bring down that
taxable income to potentiallybring you into a lower tax
bracket, for example, maybe, outof the 32% and into the 24.% Or
if we can help keep you out ofthe next tax bracket, for
example, avoiding that 8% jumpfrom 24% to 32%.
(19:19):
We wanna look at opportunitiesto do that and manage those tax
brackets appropriately.
Same thing for capital gains.
Hey, if we can get you out ofthe 15% and into the 0%, like
that's, that's phenomenal,right?
We wanna look for opportunitiesto do that.
And so those are sort of thebiggest opportunities for
planning that I'm seeing as I'mgoing through these tax
projections with clients, havingthese conversations with clients
(19:40):
and their tax professionals.
It's going to be first getting afeel for the income trajectory
and what are the different typesand amounts of income we're
gonna be working with.
And then looking at withholdingsand estimated payments.
Are we on track?
Do we need to make adjustments?
Well, we still have time to doso.
looking at adjusted grossincome.
Looking at are we phasing out ofanything and what can we do to
(20:02):
bring down that adjusted grossincome number to phase us back
into those things.
Looking at itemized deductions,is there planning opportunities
with itemized deductions tobring them above and beyond the
standard deduction amount?
And then looking at things likethat state and local tax cap and
charitable contributions.
Then looking at the QBIdeduction, are we phasing out of
(20:23):
that?
And can we phase you back intothat?
And then lastly, looking at yourtaxable income and managing our
tax brackets, are thereopportunities to bring you into
more favorable tax brackets?
Or other opportunities to keepyou out of an additional tax
bracket.
And the fascinating thing is,when you start to look at these
things together, your potentialdeductions or tax deferrals can
(20:47):
have potentially a much higherimpact than just the marginal
tax bracket that you're in.
And what I mean by that is thatvery often we'll see that, okay,
if you are in the 32% taxbracket, if you get a$10,000
deduction, you are thinking,okay, you're saving 32% of
$10,000, which is gonna be$3,200.
(21:08):
Right?
That's, that's kind of whatwe're thinking.
You're saving 32% on thatdeduction.
However, when we combine thesedifferent tax planning levers
together, we can see that adeduction can lead to a much
higher effective tax savings,like an effective tax rate than
just that marginal tax rate thatyou're in.
(21:29):
If you're able to, for example,if you're able to bring down
your adjusted gross income andbring down that taxable income.
You may be able to do severalthings at once.
You may be able to phase into ahigher child tax credit you,
which will offset dollar fordollar the tax that's due.
May be able to increase your QBIdeduction, which lowers your
(21:51):
taxable income, you may be ableto increase those itemized
deductions, which lowers thattaxable income.
So if you pull several of theselevers at once, a$10,000
deduction, for example, may havea$20,000 decrease in taxable
income, and a very healthy,effective tax rate you're saving
(22:11):
at Now I'm just throwing outexamples, right?
That's that's, that's not basedon any specific example I, I've
been looking at.
But that's, that's sort of theconcept.
When you can pull several ofthese levers together, you can
have a much larger impact thanjust that marginal tax bracket
you're looking at.
And so those are someopportunities you can start to
think about as you are havingthese these conversations with
your financial professionals.
(22:32):
As you're having theseconversations with your tax
professionals, you can, you canlook at these different
opportunities, these differentlevers, and ask yourself, Hey.
What are the types of income I'mworking with?
Are we phasing out of anythingthat we can try to phase back
into?
are we phasing into anyadditional taxes that we can try
to phase out of?
(22:52):
Where are these opportunitiesand levers to pull?
And how do you do that?
Well, that's where thoseconversations become really
important because you can seewhat are the opportunities that
are specific to you, right?
You ultimately, you want to geta projection done by your
professionals and look at theopportunities that are specific
to you.
It's gonna be, generallyspeaking, some combination of
(23:13):
planning in the business,looking at opportunities to
reinvest in the businesspotentially.
For example, especially as weget into Vision Expo, buying
equipment that has a truebusiness use and a return on
investment, or whatever it maybe, reinvesting back into the
practice and using thoseexpenses as tax deductions or
using depreciation.
(23:33):
or it could be other things likeif your kids can, can
legitimately do work in thepractice, maybe you can add your
children to payroll and, and usethat as an opportunity for tax
planning as well.
So it's gonna be someopportunity of planning in the
business.
Or evaluating the businessentity.
Depreciation planning aroundreal estate, especially if
you're buying the commercialreal estate of your practice or
(23:55):
a or if you own a short termrental and you follow the short
term rental rules, because taxlosses from that type of real
estate may be used to offset allof your other active type
income, like practice profit.
And especially now that the OneBig Beautiful Bill Act
reintroduced a hundred percentbonus depreciation.
and that can potentially becombined with a cost segregation
(24:16):
study and, and that real estate,that's another potential
opportunity to use there.
It could be using retirementaccounts, so using your 401k in
the practice, for example.
and that's not only the employeecontributions, but also profit
sharing contributions if thecash flow and the demographics
of the practice makes sense.
For very mature, very heavilycash flowing practices, maybe a
(24:39):
cash balance plan, if that makessense.
So looking at your retirementplan and asking, can we get the
most outta this retirement plan?
Maybe it's time to switch from asimple IRA over to that 401k
plan now that we can do thatmidyear.
Or it could be using charitablecontributions as we talked about
using, for example,donor-advised funds to bunch
those contributions in thecurrent year, benefit from that
(25:00):
tax planning and then, and thenactually make those donations
over the coming years outta thatdonor-advised fund.
Those are some general sort ofcategories you might think
around, but ultimately it comesdown to.
What do your own professionalsadvise?
It's going through thatprojection with your own, your
own professionals.
Having those conversations withyour own financial and tax
professionals.
And if you aren't, reach out.
(25:22):
Would love to start theseconversations.
We're getting into the end ofthe year, right?
We're getting into the fourthquarter.
Pretty soon it's time to startthinking about tax planning for
the year and seeing whatopportunities are ahead of us.
And in addition, one thing I'lllink to in the show notes is an
article I did for IndependentStrong, all about these key tax
planning levers for practiceowners and so that'll be
something you can find in theshow notes.
(25:43):
let me know if you have anyquestions.
You can reach me here at Evon,evon@optometrywealth.com.
Uh, if you wanna talk about whatwe've talked about today on the
podcast or if you just wannachat in person at Vision Expo.
Always happy to have aconversation, and appreciate
your time we will catch you onthe next episode.
In the meantime, take care.
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