Practice pays $2.85M/yr premium to owner-controlled captive; captive receives tax-free (small insurance co election).
IRC §831(b) allows an insurance company with net premiums ≤$2.85M/yr (2024) to elect taxation ONLY on investment income (premiums tax-free). Doctor/lawyer/dentist practice pays deductible premium to owner-controlled captive insuring hard-to-insure risks (malpractice deductibles, cyber, business interruption, regulatory). Captive builds tax-free reserves; on wind-down, distributions can be capital gains. IRS heavily scrutinizes — MUST have genuine risk, arms-length premiums (actuary), true insurance operations. Post-2023 IRS listed transaction rules tightened; still viable if legitimate.
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Combine a defined-benefit cash balance plan with 401(k)+profit share — total deductible contributions $400K+/yr for older owners.
Professional practice (PLLC) contracts with owner's Management LLC for admin, IP, real estate — shifts income to lower-rate entity.
Practice rents from professional's own real estate LLC — rent flows to owner tax-favored, building appreciates outside practice.
At sale, allocate purchase price to professional's PERSONAL goodwill (patient/client relationships) — capital gain, one level of tax.
MSO owned by non-professionals contracts with PC for management — recapitalize practice with outside capital legally.
Pass-Through Entity Tax lets practice deduct 100% of state income tax federally, bypassing $10K SALT cap.
C-corp (or spouse-hired setup) can reimburse 100% of family medical expenses tax-free — bypasses 7.5% AGI floor.
Solo practitioner uses solo 401(k) with after-tax contributions + in-plan Roth conversion = $69K/yr into Roth (2024).