What Doctors in New York Can Deduct on Their Taxes in 2025

For physicians and healthcare professionals practicing in New York, tax season often brings more questions than answers. High income levels, multi-entity practice structures, and overlapping state and city obligations create a tax landscape that’s far from straightforward. Many doctors don’t realize just how much they could be saving; or how quickly a small misstep can trigger an audit or increase their effective tax rate.

At Revonary, we work closely with doctors, dentists, and other healthcare professionals across New York to navigate these complexities and identify smart, compliant ways to reduce tax liability. Here’s what doctors can deduct on their taxes in 2025, and why personalized, strategic planning is essential.

Federal Deductions Available to Doctors in 2025

Physicians operating as sole proprietors, partners, or S corporation shareholders may qualify for a number of key federal deductions, but not all are automatic. Income thresholds, business structures, and even how you pay yourself can impact your eligibility.

Qualified Business Income (QBI) Deduction

The QBI deduction under IRC Section 199A allows eligible pass-through business owners to deduct up to 20% of their qualified business income, and has been made permanent by the One Big Beautiful Bill. However, because medical services fall into the category of a "specified service trade or business" (SSTB), this deduction begins to phase out at certain income levels—starting at $191,950 for single filers and $383,900 for joint filers in 2025.

Doctors operating their own practice must be particularly careful. If income exceeds the phaseout range, the deduction may be fully disallowed unless proactive planning is done, such as adjusting compensation, establishing a defined benefit plan, or optimizing the ownership structure of the practice. You can learn more from the IRS Qualified Business Income FAQ.

Retirement Plan Contributions

Retirement plans remain one of the most powerful deduction tools for high earners. In 2025, physicians can contribute up to $69,000 to a Solo 401(k) (if age 50+) or similar plan. Defined benefit and cash balance plans allow for even greater contributions, depending on income and age. These plans reduce current-year tax and support long-term financial security.

Related: QBI Adjustment for Retirement Plan Deductions: What Business Owners Need to Know

Self-Employed Health Insurance Deduction

Physicians who operate as sole proprietors or own a pass-through entity can deduct health insurance premiums paid for themselves, their spouse, and dependents, as long as the policy is in the name of the business or the owner. This deduction lowers adjusted gross income, which can, in turn, affect eligibility for other deductions and credits.

Ordinary and Necessary Business Expenses

Under Section 162 of the Internal Revenue Code, expenses must be both “ordinary and necessary” to be deductible. For doctors, this typically includes:

• Continuing medical education (CME) and licensure
• Medical journals, subscriptions, and membership dues
• Malpractice insurance premiums
• Practice management software and IT systems
• Office rent, equipment, supplies, and staff salaries

Proper documentation and separation of personal vs. professional expenses is essential. Many of these deductions may also have implications for state-level reporting, especially if you itemize on your New York return.

Leasehold Improvements and Depreciation

Leasehold improvements (such as remodeling exam rooms or upgrading a waiting area) may qualify for full expensing under Section 179 or bonus depreciation. When placed in service in 2025, these improvements can provide large deductions in the current year rather than being spread across 15 years or more.

Navigating New York State and City-Level Deductions

While federal deductions form the foundation of tax planning, they tell only part of the story for New York doctors. State and local tax rules, including ongoing limitations on deductibility, require a separate layer of strategy.

State and Local Tax (SALT) Deduction Limitation

The One Big Beautiful Bill Act (OBBBA), passed in 2025, increased the federal deduction cap for state and local taxes (SALT) from $10,000 to $40,000 per return (or $20,000 for married filing separately), with a 1% annual inflation adjustment through 2029. However, for high-income taxpayers, the benefit phases out:

• For joint filers, the cap is reduced as income exceeds $500,000, and
• For single filers, the phase-out begins at $250,000.

The cap never drops below the original $10,000 and will revert to that amount starting in 2030, unless extended.

For many high-income physicians in New York, the practical benefit of the expanded cap is minimal due to this income-based phase-out. As a result, New York’s Pass-Through Entity Tax (PTET) remains a key strategy. By electing into the PTET, S corporations and partnerships can pay state income tax at the entity level—resulting in a fully deductible federal business expense and a personal NY tax credit for the owner.

The PTET election must be made annually by March 15, and estimated payments are due during the year. In multi-owner practices, all members must consent to the election. Even after OBBBA, the PTET remains one of the most effective SALT workarounds for high-income professionals.

Itemized Deductions on the New York Return (Form IT-196)

Even if you take the standard deduction on your federal return, New York allows you to itemize separately on your state return. This is especially valuable for doctors who have high medical expenses, mortgage interest, or investment-related deductions that don’t meet federal thresholds but can still be partially recovered at the state level.

Form IT-196 lets New York taxpayers deduct unreimbursed medical and dental expenses that exceed 10% of federal AGI, along with other deductions such as investment interest, casualty losses, and certain job-related expenses. 

The Importance of a Specialized Tax Strategy

For New York doctors, tax strategy is not a once-a-year activity—it’s an ongoing process. Entity structure, compensation planning, expense tracking, and benefit design all intersect to determine your tax liability. A generic CPA or tax preparer who isn’t specialized in the nuances of accounting for doctors may miss these nuances.

At Revonary, we specialize in working with doctors and healthcare professionals across the state. We understand the intricacies of practice ownership, employment arrangements, and the mix of personal and business deductions that make your return unique. Whether you’re managing a multi-location practice or earning 1099 income alongside a W-2 salary, we bring the expertise needed to optimize your financial position while staying fully compliant.

Looking Ahead to the 2025 Filing Season

With the passage of the One Big Beautiful Bill Act, there’s now greater clarity around key tax provisions for 2025 and beyond. The QBI deduction has been made permanent, the SALT cap has been expanded (with phase-outs), and many prior sunset provisions have been extended or restructured. As a result, tax strategies that worked in 2024 may require updates to remain effective. If you haven’t reviewed your tax plan recently, now is the time to align it with the new rules.

Start by evaluating:

• Whether your entity structure still supports your goals
• How much you're contributing to tax-advantaged retirement plans
• What expenses you’re currently missing or underreporting
• Whether you're properly planning for New York’s PTET or UBT rules
• If your current advisor understands the unique challenges of healthcare professionals in New York

As a doctor, your time is valuable—and your finances are complex. A proactive, customized tax strategy can free up both time and money while helping you build lasting wealth.

Revonary’s team of experienced tax professionals works with healthcare clients every day. Whether you’re in private practice, part of a group, or earning multiple types of income, we can help you maximize deductions and minimize surprises.

Get in touch today to learn how we can help you build a smarter, more effective tax strategy for 2025 and beyond.