How Much Should a New Audiology Practice Set Aside for Taxes?

2026-08-21

Learn how much a new audiology practice should set aside for taxes, with realistic 2026 figures, practical steps, and expert tips.

Starting an audiology practice is exciting, but the business side can be daunting, especially taxes. A common question is: how much should you set aside? The short answer: plan to set aside 25% to 35% of your net income for federal and state taxes, plus self-employment tax. This guide breaks down the numbers, explains why, and gives you actionable steps to avoid surprises.

Why 25% to 35%?

Your tax rate depends on your business structure and income level. As a new practice owner, you might be a sole proprietor, LLC, or S-corp. Here’s what affects your rate:

Federal income tax: Progressive brackets, from 10% to 37% for 2026. Most new owners fall in the 22% to 24% bracket.
Self-employment tax: 15.3% (12.4% Social Security + 2.9% Medicare) on net earnings, if you’re a sole proprietor or LLC member.
State income tax: Varies from 0% (Texas, Florida) to over 13% (California). Average is around 5%.

So, if you’re in the 22% federal bracket, add 15.3% self-employment, and 5% state, that’s 42.3%. But you get deductions, so effective rates are lower. A safe range is 25% to 35% of net profit.

Example: If your practice nets $80,000 after expenses, set aside $20,000 to $28,000 for taxes.

How to Calculate Your Estimated Tax Payments

The IRS expects you to pay taxes quarterly if you expect to owe more than $1,000. Here’s a simple method:

Estimate your annual net income: Project revenue minus deductible expenses (rent, staff, equipment, supplies).
Calculate your effective tax rate: Use tax software or a CPA. For a rough estimate, use 30% for federal + state.
Divide by 4: Pay that amount each quarter.

Example: Net income $100,000 × 30% = $30,000 ÷ 4 = $7,500 per quarter.

If your income fluctuates, use the annualized method (Form 2210) to adjust payments.

Practical Steps to Set Aside Money This Week

Open a separate business savings account: Use it only for taxes. Transfer a percentage of every deposit.
Set up automatic transfers: After each client payment, move 25% to 35% to the tax account.
Use accounting software: QuickBooks or Xero can track income and estimate taxes.
Pay quarterly estimates: Use IRS Direct Pay (free) or EFTPS. Mark your calendar: April 15, June 15, Sept 15, Jan 15.
Track deductible expenses: Keep receipts for equipment, rent, utilities, marketing, and continuing education.

Common Tax Deductions for Audiology Practices

Maximize deductions to lower your tax bill:

Equipment: Audiometers, tympanometers, OAE devices, and computers (can be expensed via Section 179).
Office rent and utilities
Staff salaries and benefits
Professional liability insurance
Marketing and advertising
Continuing education and license fees
Software subscriptions (practice management, billing)
Vehicle expenses if used for business

Keep detailed records; the IRS requires receipts for expenses over $75.

What If You Don’t Set Aside Enough?

Underpayment penalties and interest can add up. The IRS charges interest on unpaid taxes, plus a penalty of 0.5% per month on the unpaid amount. To avoid this, ensure your quarterly payments meet the “safe harbor” rule: pay at least 100% of last year’s tax liability (or 110% if your AGI was over $150,000).

If you realize you’re short, increase your next payment or adjust withholding if you have a W-2 job.

When to Hire a CPA

If your practice is growing, a CPA can save you money. They can:

Help with quarterly estimates
Identify deductions you might miss
Advise on business structure (S-corp vs. LLC)
Prepare your annual return

Cost: $300 to $1,000 for a simple return, but more if you need ongoing advice. Many new owners find it worth it.

FAQ

Q: Do I have to pay quarterly taxes if I’m an LLC? A: Yes, if you expect to owe more than $1,000. LLCs are pass-through entities, so you pay personal income tax on profits.

Q: Can I deduct health insurance premiums? A: Yes, if you’re self-employed, you can deduct premiums for yourself, spouse, and dependents.

Q: What if I don’t make a profit in my first year? A: If you have no net income, you may not owe taxes, but you still need to file. You can also carry forward losses to offset future income.

Q: Should I incorporate to save on taxes? A: An S-corp can save on self-employment tax, but it adds complexity. Consult a CPA to see if it’s right for you.

The Bottom Line

Set aside 25% to 35% of your net income for taxes. Open a separate account, make quarterly payments, and track deductions. If you’re unsure, work with a CPA. Planning now prevents stress later. Start this week: calculate your estimated tax, open that savings account, and schedule your quarterly payments.