Today’s Micro-Business Tactic:

The 199A Qualified Business Income Deduction (QBI) – Maximizing Tax Benefits for Physician-Owned Micro-Corporations

Let’s be honest: most doctors overpay in taxes, and it’s not because they’re careless, it’s because they’re employees. But when you own your own micro-corporation, one of the most powerful tax tools at your disposal is the 199A QBI Deduction.

If you've never heard of it or are unsure how to make it work for you, don’t worry, this post will give you a practical walk-through of how I and other physician entrepreneurs have strategically unlocked thousands of dollars in tax savings using the 199A deduction.

1. What Is the 199A QBI Deduction?

The QBI deduction was created as part of the 2017 Tax Cuts and Jobs Act. It allows eligible pass-through entities, like sole proprietors, partnerships, LLCs, and S-corporations, to deduct up to 20% of qualified business income from their taxable income.

Here’s the fine print:

• It’s a deduction on your taxable income, not your self-employment tax.

• Qualified business income (QBI) is typically your net business profit excluding owner salary (if S-corp), capital gains, interest, and certain passive income.

For physician entrepreneurs, this deduction could mean saving $20,000–$40,000 a year with proper planning.

2. Physicians = Specified Service Trade or Business (SSTB)

Unfortunately, doctors are part of a group the IRS calls a “Specified Service Trade or Business” (SSTB). That means if your income is too high, you get phased out of the deduction.

For 2024, the phaseout ranges are:

• $197,300 – $247,300 for single filers

• $394,600 – $494,600 for married filing jointly

If your taxable income is above these limits, you’re out of luck, unless you get strategic. Let’s explore how.

3. Tactics to Maximize Your 199A Deduction

a) Lower Your Taxable Income (Legally)

You need to reduce your taxable income, not necessarily your gross receipts. Here are my go-to tools:

• Max Out Retirement Plans: Contribute to a Solo 401(k), SEP IRA, or Defined Benefit Plan.

• Use an HSA: If eligible, contribute to a Health Savings Account.

• Defer or Accelerate Income: Shift income into another tax year if you're near the phaseout cliff.

• Load Up Business Expenses: Prepay rent, buy equipment, or invest in services that help you grow.

➡️ Recommended Tool: The Ultimate List of Business Deductions For Professional Micro-Corporations.

b) Structure Your Compensation Wisely

If you’re taxed as an S-corp:

• Pay yourself a reasonable salary (required).

• Take the rest of your profit as distributions, which are not subject to self-employment tax and may count as QBI.

Also consider:

• Spouse Compensation: Pay a spouse involved in your business, potentially shifting income across brackets.

• Multiple Business Entities: Keep non-medical ventures (consulting, real estate) separate. they might still qualify for QBI.

➡️ Need help setting up an S-Corp properly? Grab our popular guide:

📘 The S-Corp Advantage

c) Leverage Real Estate Like a Pro

Own your own office? There’s more here than just rent.

• If you own your medical office in an LLC and lease it to your practice, you might be able to claim QBI on the rental income.

• Must show active participation and proper documentation.

Or, consider branching out:

• STRs (Short-Term Rentals): With proper material participation, even your Airbnb or vacation rental income could qualify.

d) Diversify with Non-SSTB (Specified Service Trade or Business) Income Streams

This is where it gets fun, and entrepreneurial.

Physicians are classified as SSTBs, but not all income has to be. If you create non-clinical revenue streams, you might still qualify for QBI:

• Medical Consulting or Expert Witness Work

• Telemedicine (especially non-diagnostic services)

• Medical Writing or Paid Courses

• Digital Products (like e-books, templates, guides)

• Ancillary Businesses (MedSpas, aesthetics, wellness)

➡️ Free Resource: The Micro-Business Vault: 10 Hidden Revenue Streams for Physician Entrepreneurs

This free e-book is your go-to guide for expanding beyond SSTB income.

Lessons from the Field

“This week, a coaching client in Arizona restructured his income to stay just under the QBI limit by maxing out his solo 401(k) and setting up a defined benefit plan. He saved over $26,000 in federal taxes with that move alone. He had no idea it was possible until we mapped it out together.”

—

Another client operating a side business in aesthetics split her income from her medical practice using a separate LLC. Her aesthetic income still qualified for QBI, saving her family over $8,000 annually.

Want a walkthrough? Make sure to ask your tax or accounting professional.

📥 Tool of the Week:

PEA-SimpliMD Side Hustle Tax Deduction Cheat Sheet

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✅ Business expense cheat sheet

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Scale with Coaching

Want to implement these strategies with precision?

PEA-SimpliMD offers premium 1:1 coaching for physician entrepreneurs who are ready to go beyond basic advice and get custom tax and business guidance.

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🔚 Final Takeaway: Tax Optimization Is a Strategy, Not a Hope

The 199A deduction is set to expire in 2025 unless Congress renews it. That means now is the time to maximize your benefit. As a physician entrepreneur, you’re not just a healer, you’re a business owner. Make your micro-corporation work smarter for you.

Here’s what you can do this week:

• Evaluate if your current income is near the phaseout range.

• Make a plan for retirement contributions or expense acceleration.

• Explore whether non-SSTB income streams make sense for you.

• Talk to your CPA to evaluate your S-Corp compensation strategy.

You’ve got the tools. Now let’s put them to work.

🧠 Want to go deeper into micro-business mastery?

Explore our full educational platform at The Independent Physician Blog and join hundreds of other entrepreneurial clinicians who are rewriting their financial futures.