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Tax Deductions
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Practice buy in

I would like to find out if a buy-in purchase of a medical practice that is distributed over several years can be done pre tax?

Thank you

Zip Code: 10901

Re: Practice buy in

While the IRS wants to see buy-ins done with post-tax dollars, structuring all or part of a buy-in with pre-tax dollars is quite common. All you need to do is allocate a portion of the bonus pool from the buyer to the seller each year until the buy-in is paid off.

The pre-tax method is better for the buyer for a few reasons. For starters, it's much more tax efficient, since the alternative is to receive your bonus, pay any taxes due on that compensation, and pay the remaining post-tax dollars to the seller. With a pre-tax arrangement, 100% of that earmarked compensation goes toward the practice purchase.

The other advantage is that unlike a loan, the pre-tax buy-in disappears when the employment terminates.

Good luck with this practice buy-in.

Zip Code: 01801