What Taxes Does a New Audiology Practice Pay? A Complete Guide

2026-08-21

Learn the federal, state, and local taxes a new audiology practice must pay, including income, payroll, sales, and property taxes, with practical steps to stay compliant.

Starting an audiology practice brings clinical challenges and a new set of financial obligations. Taxes are a significant part of running a business, and knowing what you owe from day one prevents surprises. This guide breaks down the specific taxes a new audiology practice will encounter, with realistic figures and actionable steps to manage them.

Federal Income Taxes

Your practice’s structure determines how federal income tax applies. If you operate as a sole proprietorship or single-member LLC, profits pass through to your personal return, taxed at your individual rate. Partnerships and multi-member LLCs file an informational return (Form 1065) but pay no income tax at the entity level; each partner pays on their share. An S corporation also passes income through, but you must pay yourself a reasonable salary, which is subject to payroll taxes.

A C corporation pays a flat 21% federal corporate tax on profits, and shareholders pay tax on dividends. For most new audiology practices, a pass-through entity is common due to simplicity and tax flexibility. Consult a CPA to choose the best structure for your situation.

Self-Employment Taxes

If you are a sole proprietor, partner, or LLC member, you pay self-employment tax, which covers Social Security and Medicare. The rate is 15.3% on net earnings up to the Social Security wage base ($168,600 in 2026), plus 2.9% Medicare tax on all earnings above that. This is in addition to income tax. For an S corporation, you pay payroll taxes only on your salary, not on distributions, which can save money but requires careful planning.

Payroll Taxes

If you have employees, you must withhold and pay payroll taxes. This includes:

Federal income tax withholding: Based on each employee’s W-4.
Social Security and Medicare (FICA): 7.65% from the employee and 7.65% from you as the employer.
Federal unemployment tax (FUTA): Up to $42 per employee per year (6% on the first $7,000 of wages, but a credit reduces it to 0.6% if you pay state unemployment taxes on time).

You must deposit these taxes regularly, either monthly or semi-weekly, depending on your total tax liability. Use the Electronic Federal Tax Payment System (EFTPS) to make deposits.

State and Local Taxes

State taxes vary widely. Most states have a corporate income tax or a personal income tax that applies to pass-through income. Rates range from 0% (in states like Texas and Nevada) to over 13% in the highest brackets. Some states also have a gross receipts tax, which is based on total revenue, not profit. For example, California has a $800 minimum franchise tax for LLCs, and Texas imposes a franchise tax on revenue over a threshold.

Local taxes can include city or county income taxes, which are rare but exist in places like New York City and Philadelphia. Check with your state’s department of revenue and your local tax authority to understand your obligations.

Sales Tax on Products and Services

Audiology practices often sell hearing aids, batteries, and other products. Sales tax applies to these tangible goods in most states, but the taxability of professional services varies. Some states exempt hearing aids from sales tax, while others tax them at a reduced rate. For example, in Florida, hearing aids are exempt from sales tax, but in California, they are subject to the state’s 7.25% base rate, plus local taxes.

You must register for a sales tax permit in your state, collect tax at the point of sale, and file returns monthly, quarterly, or annually, depending on your volume. Keep detailed records of all sales and tax collected.

Property Taxes

If you own your office building, you pay property tax on the real estate. If you lease, you may still pay personal property tax on equipment like audiometers, computers, and furniture. Personal property tax rates vary by county and are typically based on the depreciated value of your assets. For example, in Texas, personal property tax is assessed by the county appraisal district, and the rate can be 2% to 3% of the value. Some states exempt small businesses from personal property tax if the value is below a threshold.

Estimated Quarterly Taxes

The IRS expects you to pay taxes as you earn income. If you expect to owe more than $1,000 in federal taxes for the year, you must make estimated quarterly payments. This applies to income tax and self-employment tax. Use Form 1040-ES to calculate your payments, which are due on April 15, June 15, September 15, and January 15 of the following year. Underpaying can result in penalties, so set aside a portion of each payment you receive.

Tax Deductions Specific to Audiology Practices

To reduce your taxable income, take advantage of deductions common to audiology practices:

Equipment and supplies: Audiometers, otoscopes, hearing aid test equipment, and consumables.
Rent and utilities: For your office space.
Professional fees: Legal, accounting, and consulting services.
Continuing education: Courses, conferences, and subscriptions to professional journals.
Malpractice insurance: Premiums are deductible as a business expense.
Home office: If you have a dedicated space used exclusively for business.

Keep receipts and track all expenses using accounting software like QuickBooks or Xero.

Practical Steps to Take This Week

Choose your business structure: Consult a CPA or use an online service to form an LLC or S corporation. This decision affects all your taxes.
Get an EIN: Apply for an Employer Identification Number from the IRS for free at irs.gov. You need it to open a business bank account and file taxes.
Register for state taxes: Visit your state’s revenue department website to register for income tax, sales tax, and unemployment insurance.
Set up a separate bank account: Keep business and personal finances separate to simplify tax tracking.
Open a tax savings account: Transfer 25% to 30% of each revenue deposit into a separate account for taxes. This covers income, self-employment, and state taxes.
Create a tax calendar: Note all filing deadlines, including quarterly estimated payments and annual returns.

FAQ

Do I need to charge sales tax on hearing aid fittings?

It depends on your state. Some states consider fitting a professional service and exempt it, while others tax the entire bill. Check your state’s department of revenue guidance or consult a tax professional.

Can I deduct the cost of my audiology equipment in the first year?

Yes, under Section 179, you can deduct the full purchase price of qualifying equipment up to $1,220,000 in 2026, as long as the equipment is used more than 50% for business. This can significantly reduce your taxable income in the year of purchase.

What happens if I miss an estimated tax payment?

The IRS charges a penalty based on the amount you underpaid and the time it was late. The penalty is roughly 5% of the underpayment per month, up to 25%. To avoid this, make all payments on time, even if you estimate low.

Should I hire a tax professional?

Given the complexity of business taxes, hiring a CPA who works with medical practices is a wise investment. They can save you money through deductions and ensure compliance. Fees typically range from $500 to $2,000 per year for a small practice.

The Bottom Line

A new audiology practice faces a mix of federal, state, and local taxes, including income, self-employment, payroll, sales, and property taxes. The exact amounts depend on your structure, location, and revenue. The key is to plan ahead: set aside funds, keep accurate records, and meet all deadlines. Start by choosing a business structure, getting an EIN, and registering for state taxes this week. With proper planning, taxes become a manageable part of your business, not a source of stress.