California physicians, dentists, surgeons, and other licensed healthcare professionals often have complex tax situations that go beyond a standard W-2 return. From medical practice ownership and professional corporation structures to malpractice insurance deductions and retirement plan contributions, finding a CPA or tax professional with healthcare industry experience matters.
Common Tax Issues for California Healthcare Professionals
- Professional Corporation (PC) structure — California law requires licensed professionals, including physicians, to practice through a professional corporation rather than a standard LLC. The tax implications of a PC differ from those of a sole proprietorship or partnership.
- Self-employed health insurance deduction — physicians who own their practice can generally deduct health insurance premiums paid for themselves and their families
- Retirement plan contributions — solo 401(k), SEP-IRA, and defined benefit plans offer significant tax deferral for high-income practitioners; the right plan depends on income level, staffing, and goals
- Malpractice and business expense deductions — professional liability premiums, continuing medical education, licensing fees, and medical equipment may all be deductible
Locum Tenens and Independent Contractor Work
Physicians who work as locum tenens — filling temporary assignments at hospitals or clinics — are typically treated as independent contractors. This means they receive 1099 income rather than W-2 wages and are responsible for self-employment taxes. A tax professional can help locum tenens physicians maximize deductions for travel, equipment, and professional expenses, and structure estimated tax payments correctly to avoid FTB and IRS penalties.
California-Specific Considerations
California’s high marginal income tax rates make tax planning especially important for high-income healthcare professionals. The state does not recognize some federal tax-advantaged structures in the same way. A CPA familiar with both federal and California rules for professional corporations and high-income individuals can identify planning opportunities specific to your situation.
Finding a CPA With Healthcare Experience
When searching for a tax professional, ask directly whether they have current healthcare or medical practice clients. The California Society of CPAs at calcpa.org and the California Board of Accountancy at dca.ca.gov/cba are starting points for finding and verifying qualified professionals.
Official sources referenced: IRS.gov, California Board of Accountancy (dca.ca.gov/cba), California Franchise Tax Board (ftb.ca.gov). Not reviewed by a credentialed tax professional.