The Mid-Year Tax Check Every Practice Owner Should Run
If you can believe it, we're already past the Fourth of July - which means half of 2026 is on the books. This marks a great opportunity to sit back and start to plan for the tax year. Half your tax year is already decided, and half of it you can still do something about.
April is when most owners find out where they landed. July is when you have plenty of time to change it.
At our firm, this is the time of year we're projecting out practice profit and loss and running the first real tax projections for the year - because now we have six months of actual history to work from, and six months of runway to act. You can run the same check on yourself. Here are the four questions to start with.
1. Where is my income likely to land this year?
Everything starts here. For most owners, the practice P&L is the primary building block: collected revenue, minus expenses, equals taxable profit.
Add your S-corp wage if you have one, then the rest of the household — a working spouse, real estate, investment income. Watch for one-time events (you sold real estate, an investment, a practice), and the different types of income you have - e.g., investment income can be taxed differently.
This is directional, not decimal-precise. You start with reasonable assumptions and update as the year unfolds. But it only works if your practice financials are clean and current — monthly, accurate books you can actually plan from. Not just a quarterly-updated list of alphabetized expenses.
2. Am I paying in enough as I go?
Once you have a base-case projection, the first thing to check is whether you're paying in enough through the year.
The most frustrating experience I see among optometrists isn't a high tax bill — it's a surprise one. A number bigger than expected, due all at once.
Two goals: pay in enough to avoid under-withholding penalties, and get close enough to what you'll actually owe that there's no scramble. The next federal quarterly estimate is due September 15, so a mid-year projection tells you whether to adjust — up if you're behind, down if this year is lighter than last.
And there's a second job hiding here: making sure the cash is actually there. Are you setting aside enough — ideally in a separate account — to cover those payments when they're due? This is more a practice cash flow planning exercise than anything.
3. Am I near a threshold that changes things?
This is the big one. Your tax return follows a flow:
All your income gets combined, you subtract certain items to reach adjusted gross income (AGI), then subtract deductions to reach taxable income.
Two numbers do most of the work, because they determine whether you phase out of valuable benefits or into extra taxes:
- Your AGI
- Your taxable income.
Here are a few items to keep an eye on as your income climbs:
Child Tax Credit: $2,200 per child under 17 in 2026. It begins to phase out once AGI hits $200,000 (single) or $400,000 (married filing jointly), then shrinks from there.
Roth IRA eligibility: Your ability to contribute directly to Roth IRAs phase out at higher income.
The State and Local Tax (SALT) deduction: State income taxes, property taxes, and the like are itemized deductions - useful only if your itemized total beats your standard deduction.
The cap, long stuck at $10,000, has been raised to $40,400 for 2026. But that higher cap phases down based on your AGI.
That phase-down range is expensive to travel through — the cap shrinks 30 cents for every extra dollar of income. (There's a way around this by paying state taxes through the practice — more on that below.)
ACA premium tax credits: These help offset health insurance premiums, and they matter most in the early years of practice ownership.
Starting in 2026, the credit again works on a hard cliff: once your income exceeds 400% of the federal poverty line for your family size, you're no longer eligible — period. It's a real tax cost on the extra income.
Student loan payments: If you're on an income-driven repayment plan, your payment is calculated from your AGI and family size. Those payments function like an extra 10–15% tax on your income — this can't be ignored as a part of tax planning.
Those items above are mostly driven by AGI. Two more are driven by taxable income:
Your marginal tax rate: What tax bracket do your last dollars fall into. If you're in the 24% bracket and close to the 32% bracket, that's an 8-point jump on your next chunk of income. Worth planning around.
Investment income — long-term gains and qualified dividends — has its own more favorable rates of 0%, 15%, or 20%, so it's worth watching whether more of it is getting pushed into higher brackets.
The QBI deduction: For practice owners, maybe the most important one. If you own a pass-through (sole prop, S-corp, partnership), it's worth up to 20% of essentially your business profit, and the One Big Beautiful Bill Act just made it permanent.
But it's based off taxable income before the deduction, not AGI — and because optometry is a "specified service business," it phases out completely once income climbs past the upper threshold.
The 2026 phaseout ranges are:
(New for 2026: a minimum $400 deduction if you have at least $1,000 of qualifying business income.)
So, as you look at the tax year, what items are you starting to phase out of or into?
As your income rises, it's also possible you're phasing out of multiple credits and deductions together - a well-timed deduction or tax deferral can restore more than one benefit at the same time. That's why we watch these lines so closely.
4. What levers do I still have to pull?
With half the year left, there's still time to act — if acting makes sense at all. This is where you want to talk with your own financial planner and tax pro, because the right move depends on your unique situation. But ideas worth discussing:
Retirement plan design and contributions — one of the biggest levers. If you're still on a SIMPLE IRA because a 401(k) feels expensive, you'll outgrow it; a well-designed 401(k) lets you defer more and opens the door to profit sharing. A great plan administrator is well worth it!
Depreciation from a planned practice investment — emphasis on planned. Don't buy an OCT for the write-off; you're spending a full dollar to save maybe thirty cents.
Invest because the investment adds revenue, profit, and/or efficiency — then decide whether to fully expense it now or spread it out, since full expensing isn't always the better call.
Pass-through entity tax (PTET) payments — the workaround to that SALT cap for S-corps and partnerships. The practice can pay the state tax on behalf of the owner(s).
HSA contributions, if you're eligible, is also one of the cleanest ways to lower AGI. And charitable giving through nonprofits or donor advised funds rounds out the common list.
Know which levers have a hard December 31 deadline and which (like 401(k) contributions or cost segregation studies) run to your filing deadline.
And remember: when you're inside one of those phase-out ranges, a deduction can be worth far more than your marginal rate alone — that's when good planning does its best work.
The takeaway
Four questions to ask yourself:
- Where will my income land?
- Am I paying in enough as I go?
- Am I near a threshold that matters?
- What levers do I still have — and should I pull them?
Maybe the answer is to do nothing out of the ordinary — adjust your withholding and enjoy the profit. It doesn't have to be complicated. But you want to know the opportunities in front of you while there's still time to use them.
That's the whole point of looking in July instead of April, and talking proactively with the professionals in your corner.
We go deeper on all four questions in this week's episode of the Optometry Money Podcast. Click below!
In the meantime, have a great weekend!
Evon Mendrin, CFP®, CSLP®
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