Pass Through Entities (S-Corp, PLLC, Partnership)
Privately owned practices, including S Corporations, professional limited liability companies (PLLC), and partnerships, are considered “pass through entities” under the new tax bill and are entitled to deduct 20% of their income to lower their overall taxable income.
Reducing the taxable income for pass through entities is designed to help these entities use the saved monies to reinvest in their businesses. Many otolaryngologists and other specialists may not be eligible for this deduction, however, given the restrictions on eligibility based on income. Under the new law, high-earning physicians (and others, such as lawyers) will not be able to claim the deduction. “Unfortunately, most professional workers such as doctors and lawyers have been excluded from this deduction,” said Dr. Grisel, adding that the rationale to exclude professional workers from this deduction is based on what he says is flawed logic—logis that assumes, for example, that physicians don’t have the same type of significant overhead as do other types of pass-through entities.
“This exclusion, in my opinion, shows the lack of understanding by lawmakers about the realities of running an otolaryngology clinic in 2018,” he added, citing the many overhead expenses that medical practice owners have, including expensive equipment, rising staff health insurance, and digital health costs. “This deduction would have provided much-needed resources to cover some of these rising costs.