7 Things to Know Before You Start a New Midwifery Practice
Learn the 7 tax essentials for starting a midwifery practice, from entity choice to deductions, with practical steps and realistic 2026 figures.
Starting a midwifery practice is exciting, but the tax side can feel overwhelming. The good news: with a little planning, you can avoid costly mistakes and keep more of what you earn. Here are the 7 things you need to know before you open your doors, with concrete numbers and steps you can take this week.
1. Your Business Entity Affects Your Tax Bill
Your choice of entity determines how you pay taxes and what you can deduct. Most midwives start as a sole proprietorship (simplest) or an LLC (adds liability protection). An S-corp can save on self-employment tax, but it adds administrative costs.
- Sole Proprietor: No registration fees, but you pay self-employment tax on all net income (15.3% in 2026).
- LLC (single-member): Same tax treatment as sole proprietor, but with liability protection. Annual state fees range from $0 to $800 (e.g., California).
- S-Corp: You pay yourself a reasonable salary (subject to payroll taxes) and take the rest as distributions, which avoid self-employment tax. Setup costs: $500-$1,500 for filing and ongoing payroll ($50-$200/month).
Action this week: Compare LLC vs. S-corp using a simple profit projection. If your net income will be under $40,000, an LLC is usually enough. If over $80,000, talk to a CPA about S-corp.
2. You Must Pay Quarterly Estimated Taxes
As a self-employed midwife, no one withholds taxes from your pay. The IRS expects you to pay estimated taxes quarterly (April 15, June 15, Sept 15, Jan 15). If you owe more than $1,000 at filing, you may face penalties.
- How much to pay: Use Form 1040-ES. A common method: pay 100% of last year’s tax liability (or 110% if your income is over $150,000).
- What it includes: Income tax plus self-employment tax (Social Security and Medicare).
Action this week: Open a separate savings account for taxes. Transfer 25-30% of every client payment into it. This simple habit prevents cash flow shocks.
3. Track Every Deductible Expense from Day One
Midwifery practices have many deductible expenses, but you need records. Common deductions include:
- Home office: If you have a dedicated space, you can deduct $5 per square foot (up to 300 sq ft) using the simplified method, or actual expenses (mortgage interest, utilities, insurance).
- Supplies and equipment: Birth kits, dopplers, scales, and office furniture. Equipment over $2,500 can be expensed immediately via Section 179.
- Professional expenses: Licenses, certifications, continuing education, malpractice insurance, and professional memberships.
- Marketing: Website, business cards, ads, and client gifts (up to $25 per person).
- Vehicle: If you drive to client homes or hospitals, track mileage. The 2026 standard mileage rate is 67 cents per mile.
Action this week: Set up a bookkeeping system (e.g., QuickBooks, Wave, or a spreadsheet). Categorize every expense as it happens. Keep receipts digitally using a scanner app.
4. You Can Deduct Health Insurance Premiums
Self-employed midwives can deduct health insurance premiums for themselves, their spouse, and dependents. This deduction is taken on Schedule 1, reducing your adjusted gross income, and it also lowers your self-employment tax.
- Eligibility: You must not be eligible for an employer-sponsored plan (e.g., through a spouse’s job).
- What counts: Medical, dental, and long-term care insurance premiums.
Action this week: If you haven’t already, purchase a health plan in your name or your business’s name. Keep the policy documents for your tax file.
5. Retirement Plans Offer Big Tax Breaks
You can save for retirement and reduce your taxable income at the same time. Options for self-employed midwives:
- SEP IRA: Contribute up to 25% of net earnings, max $69,000 in 2026. Easy to set up.
- Solo 401(k): Contribute up to $23,000 (plus $7,500 catch-up if over 50) as employee, plus up to 25% of net earnings as employer. Total max $69,000.
- Simple IRA: If you have employees, this allows both you and them to contribute.
Action this week: Open a SEP IRA or Solo 401(k) with a low-cost provider like Fidelity or Vanguard. You can fund it up to the tax filing deadline (including extensions) for the previous year.
6. Sales Tax May Apply to Products
If you sell products like herbal supplements, teas, or birth kits, you may need to collect sales tax. Rules vary by state. Some states exempt medical supplies, but not all.
- Check your state: Visit your state’s department of revenue website. For example, in Texas, medical supplies are exempt, but in New York, some are taxable.
- What to do: Register for a sales tax permit if required. Collect tax on taxable items and file returns monthly or quarterly.
Action this week: Look up your state’s sales tax rules for midwifery products. If you’re unsure, call your state’s tax agency. It’s free to ask.
7. Hiring Help Brings Payroll Tax Responsibilities
If you hire an office manager or a second midwife as an employee, you must withhold payroll taxes (Social Security, Medicare, federal income tax) and pay employer taxes. This adds complexity.
- Payroll service: Use a service like Gusto or ADP, costing $40-$100/month plus per-employee fees.
- Independent contractors: If you hire a doula or assistant as a contractor (1099), you don’t withhold taxes, but you must issue a 1099-NEC at year-end if you pay them $600 or more.
Action this week: If you plan to hire, decide whether they will be employees or contractors. Document the relationship with a written agreement. Set up payroll before the first paycheck.
FAQ
Q: Do I need to charge sales tax on prenatal visits? A: No, professional medical services are generally exempt from sales tax in all states. Only tangible products may be taxable.
Q: Can I deduct the cost of my midwifery certification exam? A: Yes, exam fees and study materials are deductible as professional development expenses.
Q: What if I don’t make a profit in my first year? A: You can still deduct business expenses, but if you show a loss for three out of five years, the IRS may classify your practice as a hobby and disallow deductions. Keep records showing you’re trying to make a profit.
Q: When should I hire a CPA? A: If your income exceeds $50,000, you have employees, or you’re considering an S-corp, it’s worth $200-$500 for a consultation to set up your tax strategy.
The Bottom Line
Starting a midwifery practice is a rewarding venture, but taxes require attention. Choose the right entity, pay quarterly estimates, track deductions, and consider retirement savings. Take one action this week: set up a separate tax savings account and a simple expense tracker. That single step will save you stress and money come tax time. For complex situations, invest in a CPA who understands small medical practices. Your future self will thank you.