Regardless of upcoming changes, a proactive approach can help you stay ahead of tax shifts while protecting your financial goals. Strategic planning, tailored to your unique situation, is critical to optimizing your tax position and safeguarding your practice’s future.

Smart Tax Planning Strategies to Consider

1. Tax-Efficient Business Structures

• Review your practice’s legal structure (e.g., S-corp, LLC, or C-corp) to ensure it aligns with your tax strategy.
• Evaluate profit-sharing arrangements to maximize efficiency.
• Consider multiple entity structures, especially for practices with diverse income streams or investments.

2. Compensation Planning

• Explore qualified retirement plans to reduce taxable income while supporting long-term savings.
• Consider deferred compensation arrangements to shift tax liabilities.
• Balance salary and distribution strategies to optimize tax efficiency.

3. Timing Strategies

• Plan major purchases or investments to align with favorable tax years or deductions.
• Strategically accelerate or defer income based on anticipated tax changes.
• Evaluate the timing of bonus payments and employee benefit programs for maximum advantage.

Estate Tax and Legacy Planning for Veterinary Practices

Estate tax planning has taken on renewed urgency due to upcoming legislative changes. As of 2024, the federal estate tax exemption allows you to pass up to $13.61 million to your heirs without federal estate tax. However, under current law, this exemption is scheduled to be cut in half in 2026 when provisions of the Tax Cuts and Jobs Act expire.

The incoming administration may further influence these timelines or exemption levels, potentially introducing new legislation to modify or extend current thresholds. Additionally, state-specific estate tax rules can vary significantly. For example, in Washington state, the exemption is less than $3 million, underscoring the need for localized planning.

Upcoming changes to monitor:

• A reversion to pre-2018 exemption levels (adjusted for inflation).
• Modifications to gift tax exclusions and generation-skipping transfer tax rates.
• Potential new legislation under the incoming administration to alter estate and gift tax frameworks.

For many DVMs, the practice represents their largest asset, making estate tax planning an essential part of legacy preparation.

Key tools to consider with your advisor:

• Trusts and advanced estate planning vehicles to shield assets.
• Life insurance strategies for liquidity and tax efficiency.
• Strategic gifting programs to transfer wealth incrementally.
• Family limited partnerships to manage business transitions and minimize taxes.
• Buy-sell agreements to ensure smooth ownership changes.

By building flexibility into your plan, you can adapt to legislative shifts while securing your financial legacy. These strategies remain valuable regardless of exemption levels or tax law changes.

Planning Ahead: Your Next Steps

While some tax changes—like the 2026 estate tax exemption adjustment—are scheduled, others may hinge on the direction of the incoming administration and legislative priorities. Preparing for a range of scenarios while maintaining operational flexibility will be critical.

What you can do now:

1. Get a current valuation of your practice to understand its market value and potential tax exposure.
2. Review estate planning documents to align with current and projected tax laws.
3. Explore tax-efficient business structures to optimize deductions and reduce liabilities.
4. Understand your potential tax exposure under different scenarios to inform decision-making.

What you may need to wait on:

Some decisions—like timing major investments or finalizing transition deals—may require clarity after significant policy shifts.

Keeping the Big Picture in Focus

While tax planning is essential to protecting your practice, it’s just one part of the equation. The right advisor can help you navigate these changes while prioritizing your broader goals:

• Delivering quality care to your patients.
• Supporting your staff.
• Preserving the legacy of your veterinary practice.

Want to learn more about how upcoming tax changes could impact your practice? Schedule a consultation today , and let’s create a plan to secure your financial future.