Lease or Buy? The Tax Moves Practice Owners Miss

This article recaps a Coffee & Contracts podcast conversation and is for general education only. It is not tax, legal, or financial advice. Talk to a professional licensed in your state before acting on anything discussed here.

Most practice owners talk to their accountant once a year. By the time that meeting happens, the decisions that actually move the needle have already been made.

On the Coffee & Contracts podcast, Rusty Whitten of CARR sat down with Adam Bolitho, Tax Manager and Team Leader at Gelt, to talk through what proactive tax planning actually looks like for healthcare practice owners, from the day they sign a lease to the day they sell.

Watch the full episode below, then read on for the moves worth acting on.

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Manage your lifetime tax bill, not this year's return

The biggest mindset shift Adam pushes: stop optimizing for one tax year and start managing your lifetime tax bill. Year-to-year moves matter, but the real savings come from decisions made with the end in mind. Entity structure, retirement contributions, real estate, and exit planning all compound over decades, and a once-a-year filing relationship simply cannot capture that.

Entity structure: there is no default answer

Many new owners assume the first step is forming an LLC. Sometimes that is right. Often it is not.

• Single-member LLC: Simple to start and reported on your personal return, but limited once income scales.
• S corp: A strong fit for a small practice with one or a few owners. Paying yourself a reasonable wage can reduce self-employment tax on the rest of your net income. The tradeoff is rigidity: profits must be allocated strictly by ownership percentage.
• Partnership: More flexible on profit allocation, which helps if you plan to bring on partners later. You can even hold the partnership interest through an S corp for added efficiency.
• MSO structure: For practices raising outside capital. Because most states bar capital partners from owning the practice directly, a management services organization lets investors participate through a separate entity that charges the practice a management fee.

The right answer depends entirely on where you see the business going. That is a conversation, not a template.

Own the building: the self-rental strategy

From a purely tax perspective, owning your practice real estate can be one of the most powerful levers available. Adam's caveat first: do not let the tax tail wag the dog. There are non-tax reasons leasing makes sense, especially early on.

When ownership does fit, the self-rental strategy is compelling. You own the building through a real estate entity, rent it to your practice, and the depreciation deduction (an artificial write-down of the property's value) can create losses that offset practice income. It is a common move for owners who operate out of a building they control.

Equipment: Section 179 and bonus depreciation

Buying equipment to outfit a practice? Section 179 and bonus depreciation let you write off the full value of qualifying purchases in year one instead of spreading it over several years. For an equipment-heavy practice, that can shelter a large chunk of income. Two guardrails: only buy what you need, and watch the timing. Bonus depreciation was made permanent under recent tax reforms, but as Adam put it, permanent in the tax code does not mean permanent at all.

Retirement plans: the biggest lever once you are profitable

Once the practice is profitable, retirement plans become the largest single lever.

• Solo 401(k): If you are the only employee, you can contribute up to $72,000, pre-tax for a deduction today or Roth for tax-free growth later.
• Defined benefit cash balance plan: If things are going very well, this functions like a personal pension and can shelter hundreds of thousands of dollars a year.

Between the upfront deduction and decades of compounding growth, the lifetime savings can run into the millions.

Planning the exit: goodwill and QSBS

Nobody opens a practice planning to sell it, but building something sellable pays off. Buyers typically pursue an asset purchase, where goodwill (your patient base) generates long-term capital gains for you. There is also Qualified Small Business Stock. A service-based medical practice usually will not qualify, but the capital side of an MSO structured as a C corp potentially could, opening the door to excluding up to $15 million of gain, the same provision many tech founders use.

From doctor to landlord

The long game many savvy owners run: buy more space than you need today, lease the extra, and eventually sell the practice while keeping the building. You go from treating patients to collecting rent. From there, 1031 exchanges let you roll gains into the next property without paying capital gains along the way, and short-term rentals or real estate professional status can unlock losses against your other income. As Adam put it, the US tax code is built for real estate ownership. It is almost an unfair advantage.

The takeaway

The through-line across every strategy is timing. The earlier you bring a proactive advisor into the picture, the more of these levers are still available to pull. That is the gap Gelt was built to fill: real, tech-enabled tax strategy for successful business owners who are not getting it from a once-a-year CPA relationship.

Frequently asked questions about tax planning for practice owners

When should a practice owner start tax planning?

As early as possible, ideally before you sign a lease or launch. The earlier an advisor is involved, the more strategies (entity structure, real estate, depreciation timing) are still available to use.

Is it better to lease or buy a practice building?

It depends on your stage and goals. Leasing often makes sense early on. Owning can be very tax-advantaged later through the self-rental strategy, but do not let tax alone drive the decision.

What is the self-rental strategy?

You own your building through a separate real estate entity and rent it to your practice. Depreciation on the property can create deductions and losses that offset practice income.

Which retirement plan lets practice owners save the most on taxes?

A defined benefit cash balance plan can shelter hundreds of thousands per year for a highly profitable practice. A solo 401(k) allows up to $72,000 in annual contributions for a single-employee practice.