What We Saw When We Opened 500 Physician Tax Returns

We've reviewed a lot of physician tax returns. And after a while, patterns start to emerge, not just in what's going wrong, but in what's being left on the table year after year

Here's the honest truth: most physicians are doing some things really well. You're claiming your CME expenses, your malpractice premiums, your licensing fees. You're keeping up with your professional dues and, in many cases, your home office. That foundation is solid.

But there's a second layer, one that separates physicians who are managing their taxes from physicians who are actually building wealth through them. And that's where we consistently see the biggest gaps.

Here's what we found:

1. No Solo 401(k) or One That's Nowhere Near Maximized

This one surprises people. The Solo 401(k) is one of the most powerful retirement and tax tools available to 1099 physicians, and yet we see it missing from returns constantly. For 2026, you can contribute up to $72,000 (with additional contributions if age 50 or over). Every dollar contributed is a dollar that doesn't get taxed this year, plus compounds for decades.

Even when physicians do have a Solo 401(k), it often isn't being fully funded. Contribution limits change annually, and without someone actively tracking that, money gets left on the table.

2. No Defined Benefit Plan

If you're a high earning 1099 physician and you're not maxing out a Solo 401(k), or you already are and want to shelter more, a defined benefit plan can allow you to contribute $100,000–$300,000+ annually on a pre-tax basis.

We rarely see this on physician returns. And for physicians in peak earning years, it's one of the most powerful tools available.

3. No S-Corp Election

If you're operating as a sole proprietor or single-member LLC, you're likely paying 15.3% self-employment tax on your entire net income. An S-Corp election splits your income between salary and distributions. Along with this, the distribution portion isn't subject to self-employment tax. That's typically $10,000–$30,000 in annual savings.

It's one of the first things we look at, and one of the most commonly missed.

4. Multi-State Filing Issues for Locum Physicians

This one has real compliance risk attached to it. Locum physicians working across state lines are generally required to file in every state where they earned income. To make things more complicated each state has its own rules, thresholds, and quirks.

We regularly see returns where states are missing entirely, or where the tax isn't being allocated correctly. Beyond the missed deductions, this creates exposure for penalties and back taxes that can pile up quietly over multiple years.

5. Deductions That Aren't Fully Optimized

Most physicians are capturing the obvious deductions. But there's a long list of legitimate, well-documented expenses that don't make it onto returns. E.g., home office deductions, a portion of vehicle use, continuing education travel, professional development, etc.

The difference between "I claimed some deductions" and "I fully optimized my deductions" can be $10,000–$30,000 annually.

6. No PTET Election

The Pass Through Entity Tax (PTET) election is one of the more recent changes to the tax landscape, and it's one most physicians have never heard of. For physicians with pass-through entities (S-Corps, partnerships, LLCs), a PTET election allows the entity to pay state income taxes directly and deduct them at the federal level, effectively getting around the $10,000 (or $40,000) SALT cap.

Depending on your state and income, this can save you thousands annually. And because it's newer, it's the item we flag most often during reviews.

7. QBI Deduction Left on the Table

The 20% Qualified Business Income (QBI) deduction is one of the most valuable deductions available to self-employed physicians, but it comes with income thresholds and phase-outs that quietly reduce or eliminate the benefit if you're not planning for it correctly.

We see a lot of returns where the deduction is either partially captured or missed entirely. The right structure and planning make all the difference here, and it's something that needs to be planned for, not discovered at filing.

The Bigger Picture For Your Tax Returns

None of these are obscure loopholes. They're legitimate, well established tools that simply require the right setup and planning ahead of filing season to access. The physicians capturing them aren't doing anything exotic, they just have a tax team that's looking for them.

Disclaimer: This material is intended for educational and informational purposes only and does not constitute tax, legal, accounting, or financial advice. The content is general in nature and may not apply to your specific circumstances. Tax laws and financial regulations are subject to change and interpretation, and the application of these laws can vary based on individual situations. Before making any decisions, you should consult with a qualified tax advisor, legal counsel, or financial professional.

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