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

2026-08-21

New midwifery practices face federal, state, and local taxes. Learn about income, self-employment, payroll, and sales taxes with practical steps.

Starting a midwifery practice brings clinical challenges and a new set of financial obligations. Taxes are a significant part of running a business, and understanding what you owe from day one prevents surprises. This guide breaks down the specific taxes a new midwifery practice must pay, with realistic ranges and actionable steps.

Federal Income Tax

Your practice’s structure determines how you pay federal income tax. Most new midwives start as a sole proprietorship or single-member LLC, where business profits flow through to your personal tax return. You report this on Schedule C (Form 1040).

Sole proprietorship or single-member LLC: You pay tax on net profits at your individual income tax rate, which ranges from 10% to 37% for 2026. The average effective rate for a midwife earning $80,000 to $120,000 is roughly 15% to 22%.
Partnership or multi-member LLC: The practice files Form 1065, but you still pay tax on your share of profits via your personal return.
S Corporation: You pay yourself a reasonable salary (subject to payroll taxes) and take remaining profits as distributions, which are not subject to self-employment tax. This can save money, but requires payroll setup and formalities.

You must pay estimated taxes quarterly if you expect to owe more than $1,000. Use Form 1040-ES. For 2026, the due dates are April 15, June 15, September 15, and January 15, 2027.

Self-Employment Tax

As a self-employed midwife, you pay both the employee and employer portions of Social Security and Medicare taxes. This is the self-employment tax, calculated on Schedule SE.

Rate: 15.3% of net earnings (12.4% for Social Security up to the wage base of $176,100 in 2026, and 2.9% for Medicare with no cap).
Deduction: You can deduct the employer-equivalent portion (half) of this tax when calculating your adjusted gross income.

For a practice earning $100,000 in net profit, self-employment tax adds roughly $15,300. This is in addition to income tax.

Payroll Taxes

If you hire employees (nurses, receptionists, or another midwife), you must handle 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): 6% on the first $7,000 of each employee’s wages, but you get a credit for state unemployment taxes, often reducing it to 0.6%.

You must deposit these taxes regularly (monthly or semi-weekly) using EFTPS, and file Form 941 quarterly. If you use a payroll service (like Gusto or ADP), costs range from $40 to $100 per month plus $5 to $10 per employee.

State and Local Taxes

State taxes vary widely, but most states impose:

State income tax: 37 states have a state income tax, with rates from 2.9% to 13.3%. Some states, like Texas and Florida, have no state income tax, but they may have other taxes.
State unemployment tax (SUTA): If you have employees, you pay this to your state’s workforce agency. Rates vary from 0.5% to 10%, depending on your industry and experience rating.
Local taxes: Some cities or counties charge a business license tax or gross receipts tax. For example, Los Angeles has a gross receipts tax of $1.00 to $5.00 per $1,000 of revenue, and New York City has a similar tax.

Check with your state’s department of revenue for specific requirements. Many states allow you to register online and file annually.

Sales Tax

Midwifery services are generally exempt from sales tax because they are medical services. However, you may owe sales tax on retail sales, such as:

Products: Selling supplements, breastfeeding supplies, or baby products in your office.
Classes: Charging for childbirth education classes might be taxable in some states, but often exempt if part of medical care.

If you sell taxable goods, you need a sales tax permit and must collect and remit sales tax. Rates range from 0% to 9.5% depending on your state and locality. For example, California’s base rate is 7.25%, but local add-ons can push it to 10.25%.

Property Tax

If you own the building where your practice operates, you pay property tax on the real estate. Rates vary by locality, typically 0.5% to 2.5% of assessed value. If you lease, you may pay personal property tax on equipment and furniture, but many states exempt small businesses. Check with your county assessor.

Estimated Tax Payments: A Practical Example

Let’s say your midwifery practice nets $90,000 in 2026. Here’s a rough breakdown:

Federal income tax: $15,000 (assuming a 16.7% effective rate)
Self-employment tax: $13,770 (15.3% of $90,000)
State income tax: $4,500 (5% average)
Total federal and state: $33,270

You would pay this in four quarterly installments of about $8,317 each. If you don’t pay enough, the IRS may charge a penalty, currently around 5% to 10% of the underpayment.

Steps to Take This Week

Determine your business structure: If you haven’t already, decide if you’ll be a sole proprietor, LLC, or S Corp. For many new midwives, a single-member LLC is simple and offers liability protection. You can elect S Corp status later if profits grow.
Get an EIN: Apply for an Employer Identification Number from the IRS online. It’s free and takes minutes. You’ll need it for opening a business bank account and filing taxes.
Open a separate business bank account: This simplifies tracking income and expenses, which is critical for tax deductions.
Set up a bookkeeping system: Use software like QuickBooks or Xero, or hire a bookkeeper. Track every expense, from supplies to mileage.
Calculate your estimated taxes: Use Form 1040-ES or consult a CPA. Set aside 25% to 30% of each payment you receive for taxes.
Register with your state: Check if you need a state tax ID, sales tax permit, or business license. Visit your state’s revenue website.
Consult a tax professional: A CPA or enrolled agent who works with healthcare practices can help you plan and avoid costly mistakes. Fees range from $200 to $500 for a consultation.

FAQ

Do I have to charge sales tax on my midwifery services? Generally, no. Medical services are exempt from sales tax in all states. But if you sell retail products, you may need to collect sales tax. Check your state’s rules.

What deductions can I take as a midwife? Common deductions include home office, medical supplies, continuing education, professional liability insurance, health insurance premiums, retirement contributions, and business mileage. Keep receipts and track usage.

How do I pay myself as an S Corp? You must pay yourself a reasonable salary, which is subject to payroll taxes. The rest can be taken as distributions, which are not subject to self-employment tax. The IRS requires that your salary be comparable to what other midwives earn, typically $70,000 to $100,000.

What happens if I miss an estimated tax payment? You’ll likely face a penalty, which is based on the amount you underpaid and the time it was late. The penalty rate is around 5% to 10% per year, but it’s better to pay on time. If you miss a payment, pay as soon as possible to minimize penalties.

The Bottom Line

A new midwifery practice faces a complex tax landscape, but it’s manageable with planning. You’ll pay federal income tax, self-employment tax, and possibly state and local taxes. If you have employees, payroll taxes add to the list. Sales tax is rarely an issue for services, but be aware if you sell products. Start by setting aside 25% to 30% of your income for taxes, keep meticulous records, and consult a tax professional. Taking these steps now will keep your practice financially healthy and avoid IRS headaches later.