How Much Should a Solo Optometrist Practice Set Aside for Taxes?
Learn how much solo optometrists should set aside for taxes, including federal, state, and self-employment rates, plus practical steps to calculate and save.
As a solo optometrist, you’re responsible for paying taxes on your practice income, not just income tax but also self-employment tax. The amount to set aside depends on your net profit, filing status, and state. A common rule of thumb is to save 25% to 35% of your net income, but the exact figure requires a closer look. This guide breaks down the components, gives you a realistic range, and offers steps to calculate your own number.
Understanding Your Tax Obligations
When you’re self-employed, you pay two main types of tax on your practice’s net profit (revenue minus expenses):
- Federal income tax: Progressive rates from 10% to 37% for 2026, depending on your taxable income.
- Self-employment tax: Covers Social Security and Medicare, at 15.3% of your net earnings (12.4% for Social Security, 2.9% for Medicare). You can deduct the employer-equivalent portion (half) when calculating your adjusted gross income.
You may also owe state income tax, which varies by state (from 0% in states like Texas and Florida to over 13% in California). Some cities also levy local taxes.
The 25% to 35% Rule: Where It Comes From
For a solo optometrist with a net profit between $80,000 and $150,000, the combined effective rate often lands in the 25% to 35% range. Here’s a rough breakdown for a single filer with $100,000 net profit (2026 figures):
| Component | Approximate Amount |
|---|---|
| Self-employment tax (15.3%) | $15,300 |
| Federal income tax (effective rate ~15-18%) | $15,000-$18,000 |
| State income tax (varies, 0-9%) | $0-$9,000 |
| Total | $30,300-$42,300 |
That’s 30% to 42% of net profit, but after the deduction for half of self-employment tax, the effective federal rate drops, so 25% to 35% is a safe target for most.
If your net profit is lower, say $50,000, the percentage may be closer to 20% to 25%. If it’s higher, over $200,000, you might need 35% to 40%.
How to Calculate Your Own Set-Aside Rate
Follow these steps to get a number tailored to your situation:
- Estimate your net profit: Take your year-to-date revenue and subtract all deductible business expenses (equipment, rent, supplies, marketing, etc.). Use your accounting software or a simple spreadsheet.
- Use the IRS Form 1040-ES worksheet: This form helps you estimate your quarterly taxes. It accounts for your income, deductions, and credits.
- Calculate self-employment tax: Multiply net profit by 92.35% (to get net earnings), then by 15.3%.
- Estimate federal income tax: Use the tax brackets for 2026 (single: 10% up to $11,600, 12% up to $47,150, 22% up to $100,525, etc.). Apply your standard deduction ($14,600 for single in 2024, adjust for 2026) to your net profit minus the self-employment tax deduction.
- Add state tax: Check your state’s rate and brackets. If you’re unsure, use a flat 5% as a placeholder.
- Divide by 4 for quarterly payments, or by the number of pay periods if you pay yourself a salary.
Practical Steps to Set Aside Money This Week
- Open a separate savings account: Create a dedicated tax savings account, like a high-yield savings account, and label it “Taxes.” This keeps funds separate from operating cash.
- Set up an automatic transfer: After each patient payment or at the end of each week, transfer 25% to 35% of your net profit into that account. For example, if your weekly net profit is $2,000, transfer $500 to $700.
- Use the safe harbor rule: To avoid penalties, pay at least 100% of last year’s tax liability (or 110% if your adjusted gross income was over $150,000) in quarterly estimated payments. This gives you a baseline.
- Review quarterly: Each quarter, compare your actual income to your estimate and adjust your set-aside percentage if needed.
Common Mistakes to Avoid
- Forgetting self-employment tax: Many new owners only save for income tax and get hit with the 15.3% surprise.
- Not accounting for state taxes: States like California and Oregon have high rates, so adjust accordingly.
- Using gross revenue instead of net profit: You only owe taxes on profit, not total revenue. Don’t over-save.
- Ignoring quarterly deadlines: Estimated taxes are due April 15, June 15, September 15, and January 15. Missing them accrues penalties.
FAQ
Q: What if I have an S-corp instead of a sole proprietorship?
A: As an S-corp owner, you pay yourself a reasonable salary (subject to payroll taxes) and take distributions (not subject to self-employment tax). You’ll need to set aside for payroll taxes, federal income tax, and state taxes. The total percentage may be similar, but the mechanics differ. Consult a CPA.
Q: Can I deduct my health insurance premiums?
A: Yes, if you’re self-employed, you can deduct health insurance premiums for yourself, your spouse, and dependents, which reduces your adjusted gross income and thus your tax liability.
Q: How do I pay quarterly estimated taxes?
A: Use Form 1040-ES and pay online via the IRS Direct Pay system, or by mail. You can also make payments through the Electronic Federal Tax Payment System (EFTPS).
Q: What if I don’t set aside enough?
A: You’ll owe the balance when you file, plus potential underpayment penalties. If you’re short, you can adjust your withholding or make an extra payment before the end of the year.
The Bottom Line
For a solo optometrist, setting aside 25% to 35% of net profit is a safe starting point, but your exact rate depends on your income, filing status, and state. Use the steps above to calculate your number, open a separate tax savings account, and transfer funds consistently. Review quarterly and adjust as your income fluctuates. If you’re unsure, consult a CPA who works with healthcare practices. Planning ahead prevents surprises and keeps your practice financially healthy.