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

2026-08-21

New PT practices should set aside 25-35% of net income for taxes. Learn exact amounts, quarterly payments, and practical steps to avoid surprises.

Starting a physical therapy practice brings many financial questions, and taxes are among the most critical. The short answer: set aside 25% to 35% of your net income (profit after expenses) for federal and state taxes. This range covers income tax, self-employment tax, and state obligations. For a new practice earning $100,000 in net profit, that means $25,000 to $35,000 per year, or roughly $2,100 to $2,900 per month. But the exact amount depends on your business structure, location, and income level. This guide breaks down the numbers and gives you actionable steps to stay compliant and avoid penalties.

Why 25% to 35% Is the Right Range

The percentage you need to set aside varies by entity type and tax bracket. Here’s a breakdown:

Sole Proprietor or Single-Member LLC: You pay self-employment tax (15.3%) plus federal income tax. For a net income of $100,000, self-employment tax is about $14,130, and federal income tax (assuming single filer, standard deduction) is roughly $14,000. That’s 28% before state taxes. Add state income tax (0% to 13.3%), and you land in the 28% to 40% range.
Partnership or Multi-Member LLC: Similar to sole proprietor, but you may have additional state filings. The same 25% to 35% range applies.
S-Corporation: You pay yourself a reasonable salary (subject to payroll taxes) and take distributions. Total tax burden is often lower, but you must handle payroll taxes and quarterly filings. A common range is 25% to 30% of net profit.
C-Corporation: Corporate tax rate is a flat 21%, but you also face double taxation on dividends. Most new PT practices avoid this structure.

For most new PT practices, the 25% to 35% range is a safe bet. If you’re in a high-tax state like California or New York, lean toward 35% or even 40%. If you’re in a no-income-tax state like Texas or Florida, 25% to 30% may suffice.

How to Calculate Your Set-Aside Amount

Follow these steps to determine your specific number:

Estimate your net income. Project your revenue minus all deductible expenses (rent, equipment, supplies, marketing, insurance, etc.). For a new practice, use a conservative estimate. If you’re unsure, use your first quarter’s actuals.
Determine your effective tax rate. Use tax software or a CPA to estimate your combined federal and state rate. For 2026, the federal brackets are: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Self-employment tax adds 15.3% on net earnings up to the Social Security wage base ($176,100 in 2026).
Multiply net income by your rate. For example, if you estimate $80,000 net profit and your combined rate is 30%, set aside $24,000 per year.
Divide by 12 for monthly savings. $24,000 / 12 = $2,000 per month. Put this in a separate high-yield savings account.

Quarterly Estimated Tax Payments: What You Owe and When

The IRS expects you to pay taxes as you earn income. If you expect to owe more than $1,000 in federal taxes, you must make quarterly estimated payments. The due dates for 2026 are:

April 15, 2026 (for income earned January 1 to March 31)
June 15, 2026 (for April 1 to May 31)
September 15, 2026 (for June 1 to August 31)
January 15, 2027 (for September 1 to December 31)

To calculate each payment, use Form 1040-ES. A simple method: take your annual estimated tax liability, divide by 4, and pay that amount each quarter. If your income fluctuates, use the annualized income installment method to avoid underpayment penalties.

Penalty alert: If you underpay, the IRS charges interest on the shortfall. For 2026, the rate is around 8% per year, compounded daily. Avoid this by paying at least 90% of your current year’s tax liability or 100% of last year’s liability (110% if your adjusted gross income exceeds $150,000).

State Taxes: Don’t Forget These

Most states require quarterly estimated payments as well. Check your state’s tax authority for forms and due dates. Some states, like California, have a minimum franchise tax (currently $800 per year for LLCs). Others, like Texas, have a franchise tax based on revenue. Factor these into your set-aside percentage.

Practical Steps to Take This Week

Open a separate tax savings account. Use a high-yield savings account (APY around 4% to 5% in 2026). Transfer your set-aside amount automatically each month.
Run a tax projection. Use software like QuickBooks Self-Employed or consult a CPA. Enter your year-to-date income and expenses to get an accurate estimate.
Set up quarterly reminders. Mark the due dates on your calendar and set alerts two weeks ahead. Missing a payment can cost you penalties.
Track deductible expenses. Keep receipts for equipment, software, continuing education, mileage, and home office. Every dollar deducted reduces your tax burden.
Consult a tax professional. A CPA who works with healthcare practices can save you thousands. Expect to pay $300 to $800 for a tax projection and quarterly planning.

Common Mistakes New PT Practices Make

Underestimating self-employment tax. Many new owners forget the 15.3% tax, which is on top of income tax.
Spending the set-aside. It’s tempting to use that cash for new equipment. Don’t. Treat it as untouchable.
Ignoring state requirements. Some states have different rules, like California’s franchise tax or New York’s MCTMT.
Not adjusting after the first year. Your income will change. Recalculate your set-aside every quarter.

FAQ

Q: What if I don’t make quarterly payments in my first year?

A: You may face underpayment penalties, but the IRS often waives them if you’re new and pay your full balance by April 15. However, it’s safer to make payments. If you’re unsure, consult a CPA.

Q: Can I pay taxes with a credit card?

A: Yes, but the IRS charges a convenience fee (around 1.85% to 2.0%). It’s not recommended unless you need to earn rewards or cash flow.

Q: Should I set aside more if I’m in a high-income state?

A: Yes. In states like California or New York, your combined rate could exceed 40%. Set aside 35% to 40% to be safe.

Q: How do I know if I’m overpaying?

A: You’ll get a refund when you file your return. That’s not a bad thing, but it means you could have used that cash during the year. Adjust your quarterly payments after your first year.

The Bottom Line

A new PT practice should set aside 25% to 35% of net income for taxes, with the exact percentage depending on your entity type and state. Use a separate savings account, make quarterly estimated payments, and track deductions carefully. Running a practice is hard enough; don’t let tax season be a crisis. With a little planning, you can stay compliant and keep more of what you earn.