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Navigating Tax Strategies for Veterinary Practices: Understanding Wisconsin PTE, S Corporation Conversion, and Sales Tax

Staying ahead of tax strategies is an important part of veterinary practice ownership. Tax planning should be a year-round part of your strategy, not just at “tax time.”

Here are a few strategies to consider that can impact your practice’s financial wealth.

Wisconsin Pass-Through Entity (PTE) Tax Election

This is a significant, yet often overlooked, opportunity for veterinary practices. This election, which must be made annually, allows businesses to deduct state income taxes at the entity level. This shift can potentially lead to savings on federal income taxes, although it can increase state income tax liability.

The PTE is particularly relevant for practices where the owner's W-2 income places them in Wisconsin's 7% tax bracket. However, it's important to consult with a tax advisor on PTE election, as determining the cost of taking the election and calculating the real net benefit can be complex.

S Corporation Conversion: A Strategic Move

For veterinary practices experiencing significant growth, converting to an S corporation could be a beneficial strategic move. An S corporation is taxed similarly to a partnership or sole proprietorship, and the business's income and losses are passed through to the shareholders and reported on their individual tax returns.

This conversion can offer several advantages, including payroll tax savings and potential eligibility for the qualified business income deduction. Practices transitioning from a C corporation or sole proprietorship structure may find this particularly beneficial. Additionally, converting to an S corporation can facilitate participation in the Wisconsin PTE, making it doubly advantageous.

Optimizing Sales Tax Management

Managing sales tax effectively is an aspect of running a veterinary practice that should not be left out of your business strategy. It involves ensuring accurate settings in practice software for tax reporting, maintaining high data quality, and working closely with vendors to make sure the correct tax is charged.

Timely payment of sales tax is not just a compliance issue. In Wisconsin, it can also lead to discounts, adding a financial incentive to staying on top of this obligation.

Strategic Planning a Must

Tax management in veterinary practices goes beyond mere compliance – it's about strategic decision-making that can significantly affect your practice's bottom line. Whether it's considering the Wisconsin PTE, pondering an S corporation conversion, or optimizing sales tax processes, each decision should be made with careful consideration and professional advice.

By staying informed and proactive, you can navigate the complex world of tax regulation, turning it into an opportunity for financial optimization and growth. Contact SVA to learn how we can help you and your veterinary practice form strategies for your continued success.

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Biz Tip Topic Expert: Nathan Dreikosen, CPA

Nathan Dreikosen, CPA

Nate is a Senior Manager at SVA Certified Public Accountants focusing on the healthcare, dental, and veterinary industries. He works with practices in the southern Wisconsin and Fox Valley areas to manage cash flow, assess financial performance and growth, and evaluate expenditures. He also has experience in designing compensation models, tax planning, and providing guidance on tax implications for clients. He works with corporations, partnerships, and individuals of all sizes and ownership structures.

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