How a Physician Group Restructured to Cut Its Tax Bill by Six Figures
Sam's List Editorial | 2026-06-23
How a Physician Group Restructured to Cut Its Tax Bill by Six Figures Four physicians billing $3.8M between them, taxed as one undifferentiated entity, were paying a federal tax bill that nobody had ever actually modeled. This is a physician group tax restructure case study — an illustrative composite, not a real client file — that shows what changes when entity-level tax planning catches up with what the group is actually earning. The numbers are constructed for teaching. The strategies are real and available to most professional groups operating at this scale. The short version: a four-physician practice was operating as a single S-corp with no retirement plan past a basic 401(k) and no PTET election. A coordinated restructure added a cash balance plan layered with a defined contribution plan, paired with a PTET election to capture the state tax deduction the SALT cap was otherwise blocking. The combined moves cut the group's federal tax bill by well into six figures, with no change in revenue and no change in clinical operations. The setup behind this physician group tax restructure case study Call the practice Meridian Medical. Four physicians — three at the partner level, one approaching partnership — operating a multi-specialty outpatient practice in a high-tax state. Trailing twelve-month revenue $3.8M, partner compensation after overhead averaging $625K per partner, taxed as an S-corp passing all profits through to the partners' individual returns. The practice's retirement plan was a Safe Harbor 401(k) with the maximum employee elective deferral (the §402(g) limit — $23,500 for 2025, indexed annually) and a 4% Safe Harbor match. The partners were maxing the employee deferral but contributing modest employer contributions. Total combined retirement contributions per partner: roughly $35,000 a year. The state of operation had a vetted-bracket personal income tax around 9%. The federal SALT cap (IRC §164(b)(6)) limits the state and local tax an individual can deduct. The Tax Cuts and Jobs Act set that cap at $10,000; the One Big Beautiful Bill Act raised it to $40,000 for 2025 through 2029, but the higher cap phases back down toward $10,000 once modified AGI exceeds $500,000. At roughly $625K of compensation per partner, these physicians sat squarely in that phase-down — so they were still losing a meaningful slice of their state tax deduction at the federal level. Nobody at the practice had run the numbers on the alternatives. The CPA who had handled the group for years was a competent generalist who hadn't been asked to think beyond the annual...
