High-earning physicians face unique tax complexity that most advisors overlook
As a physician, you face a tax burden that compounds from multiple directions. High W-2 or 1099 income puts you in the top marginal brackets. Practice goodwill and equipment have appreciated significantly. Large traditional retirement account balances create future tax liabilities. And when you sell your practice, the capital gains hit can consume 20-40% of the sale price in a single tax year.
Private equity has made physician practice sales more common and more lucrative than ever. But without proactive tax planning, a significant portion of that windfall goes directly to the IRS. The combination of federal capital gains, state taxes, NIIT, and depreciation recapture on medical equipment creates a tax event most physicians are not prepared for.
Our approach addresses the complete physician tax picture — practice sale deferral, retirement account optimization, and ongoing income tax strategies — all coordinated into a single plan.
A coordinated approach to practice sale, retirement, and ongoing income optimization
Sell your practice through a 537 Installment Sale Trust to defer 100% of capital gains. Full pre-tax proceeds are invested through the Model Q portfolio, generating 7% annual income while taxes remain deferred. Step-up in basis at death eliminates taxes for heirs.
Systematically convert traditional IRA and 401(k) balances to Roth accounts during strategically chosen tax years. Assets then grow and distribute completely tax-free, eliminating future Required Minimum Distributions and providing tax-free income in retirement.
For physicians with high W-2 or 1099 income, we coordinate retirement plan maximization, charitable strategies, and investment positioning to reduce your effective tax rate year after year.
How one physician combined a 537 IST with Roth conversions to transform their tax outcome
A 58-year-old ophthalmologist selling a solo practice to a private equity-backed group. Practice valued at $1.5M (including goodwill, patient lists, and equipment). Traditional IRA balance of $1.2M. Planning to retire within 5 years.
Without planning, the practice sale would trigger approximately $285,000 in combined taxes. Meanwhile, the $1.2M IRA would face ordinary income taxes of 37%+ upon withdrawal — plus future Required Minimum Distributions forcing taxable withdrawals regardless of need.
Step 1: Practice sale structured through a 537 IST, deferring 100% of the $285,000 in capital gains taxes. Full $1.5M invested through the Model Q portfolio.
Step 2: With the practice sale gains deferred (not hitting taxable income), the physician executes Roth conversions of $240,000/year over 5 years, converting the full IRA to Roth at a lower effective rate than if the practice sale gains had been recognized in the same year.
Our tax strategies work across all medical specialties and practice structures