Coordinate the physician household and the practice

Begin with the actual income map: hospital W-2 wages, locum or consulting net profit, practice K-1s, spouse income and rental activity. Gross income alone does not establish a tax bracket, retirement contribution or available rental loss. A practice owner needs a coordinated plan for payroll, retirement funding, estimated payments and property records, rather than a promised percentage reduction.

Practice entity and payroll review

An S-corp election may change employment-tax treatment, but it is not automatically the best medical-practice structure. State professional-entity rules, reasonable compensation, other wages, employer payroll taxes, state taxes, retirement contributions and administration costs all matter. Distributions do not replace compensation for services and do not create retirement-plan compensation. A second management or property entity requires real business purposes, supportable charges and counsel review; a deduction in one entity can be income in the other.

2026 retirement choices for employed and owner physicians

For 2026, employee elective deferrals are limited to $24,500. A plan that permits catch-up contributions can allow another $8,000 for an eligible participant age 50 or older, or $11,250 instead for someone attaining age 60, 61, 62 or 63 during 2026. The annual-additions ceiling is the lesser of $72,000 or 100% of applicable compensation, excluding eligible catch-up contributions. Employee deferrals, employer contributions and voluntary after-tax employee contributions share that ceiling. The corresponding dollar ceilings including catch-up are $80,000 or $83,250, not amounts everyone can contribute.

An owner-only plan is for an owner, or owner and spouse, without other eligible employees. Do not equate this with having no full-time staff: review age, service, eligible long-term part-time employees, and employees of controlled-group or affiliated-service-group businesses. A spouse needs actual services and compensation. A plan administrator must determine coverage before an owner-only design is used.

Employee deferrals generally share a personal limit across 401(k) and 403(b) plans, so a hospital plan can use capacity otherwise available in a side-business plan. Eligible 457(b) plans have a separate limit, but governmental and tax-exempt employer plans have different rules and risks. Ask the employer for its plan terms rather than assuming an extra account is available.

The 2026 IRA contribution limit is $7,500, with a $1,100 catch-up for eligible people age 50 or older, subject to compensation and applicable income rules. A nondeductible IRA contribution and Roth conversion require separate review of the aggregate traditional, SEP and SIMPLE IRA balances and Form 8606; a conversion is not automatically tax-free.

For 2026, an affected participant whose 2025 FICA wages from the sponsoring employer exceeded $150,000 generally must make catch-up contributions as Roth contributions. This is a prior-year employer-wage test, not a test of household income or S-corp distributions. Have payroll and the administrator confirm applicability and plan support. Roth contributions do not produce a current income-tax deduction; qualified Roth distributions can be tax-free.

Cash balance plans require a census, not an income-band estimate

A defined benefit or cash balance plan requires an actuarial design and ongoing funding analysis. Age, compensation, promised benefits, existing balances, workforce coverage and other plans affect contributions. Ask for an owner-and-staff funding range, administration costs, deduction analysis and exit obligations before choosing a design. It is not a fixed additional deduction for every high-income physician.

Locum income and the self-employment calculation

For a sole proprietor using the regular Schedule SE method, net earnings generally start at 92.35% of net business profit, not 100%. In 2026, the 12.4% Social Security component applies only up to the remaining $184,500 wage base after relevant Social Security wages; the 2.9% Medicare component has no wage-base ceiling. The 0.9% Additional Medicare Tax depends on combined covered wages and self-employment income and filing status: $250,000 married filing jointly, $125,000 married filing separately, and $200,000 for other statuses. Employer withholding above $200,000 is not the same as the household liability threshold.

Do not compare a deduction with a tax payment as if the two were dollar-for-dollar savings. Verify worker classification, ordinary business expenses, tax home and temporary-assignment facts. Travel is not automatically deductible merely because an assignment lasts under a year; commuting and personal expenses remain separate.

Rental losses need a separate eligibility review

Real estate professional status requires both statutory time tests and material participation in the relevant rental activity; status alone does not make every loss deductible. The short-stay exception can remove an activity from the rental category, but material participation still matters. Basis, at-risk, passive-loss and excess-business-loss limitations may defer deductions. Review household participation records, grouping decisions and property basis before projecting an offset against practice or W-2 income.

What to bring to a coordinated tax-planning engagement

Bring recent individual and practice returns, payroll reports, retirement plan documents and staff census, related-business ownership records, rental depreciation schedules and expected cash needs. Ask which recommendations AE will model, which the plan administrator or legal counsel implements, and whether return preparation, payroll changes and ongoing plan administration are separately scoped. Use a secure agreed handoff for payroll and personal records, not a public form.

Primary sources and implementation records

Limits here are for tax year 2026. Publication 560 supplies general rules and worksheets; use the 2026 notice for indexed dollar limits. Educational examples are not client results or a personalized contribution recommendation.

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