For a profitable Fresno medical or dental practice, retirement plan design is usually the largest deduction still on the table. It is also the one most practices underuse, because they set up a SEP years ago when the practice was small and never revisited it.
Why this matters more once you are above the QBI threshold
Health is a specified service trade or business. For 2025 the qualified business income deduction phases out entirely above $494,600 of taxable income for joint filers, or $247,300 otherwise.
Above that line, a substantial deduction that other businesses keep simply does not exist for you. Retirement contributions become the main remaining lever, which is why plan design deserves real attention rather than defaulting to whatever was easiest to open.
The 2026 numbers
- 401(k) elective deferral: $24,500
- Catch-up, age 50+: $8,000
- Catch-up, ages 60 to 63: $11,250 under SECURE 2.0
- Total annual additions per participant: $72,000, or $80,000 including catch-up, or up to $83,250 for ages 60 to 63
That total additions figure is the one to hold on to. It caps what can go into a defined contribution plan for any one person. Everything below is about how close you can get to it, and whether you can go beyond it.
The options, roughly in order of ambition
SEP IRA
Simple to run, no annual filing, contributions flexible year to year. The catch is proportionality: whatever percentage of compensation you contribute for yourself, you generally contribute for every eligible employee.
For a solo practitioner that is fine. For a practice with six staff it becomes expensive quickly, which is why SEPs tend to outlive their usefulness.
SIMPLE IRA
Lower limits, mandatory employer contribution, minimal administration. Occasionally right for a small practice with thin margins. Rarely the answer for a profitable one, because the ceiling is too low.
Safe harbor 401(k) with profit sharing
For most established practices this is the sensible base. The safe harbor contribution satisfies nondiscrimination testing automatically, so owners can defer the full amount without testing failures. Profit sharing sits on top and is discretionary year to year.
Cross-tested or new comparability profit sharing
Where the demographics allow, a cross-tested design tests contributions on projected benefits at retirement rather than current dollars. Because older participants have fewer years to accumulate, this can justify allocating a larger share to owners who are older than the staff.
It depends entirely on your census. A practice where the owner is 55 and the staff average 30 has a strong case. One where the owner is 35 and the staff are older has almost none. This is arithmetic, not preference.
Cash balance plan
A defined benefit plan layered over the 401(k). Because the limit is driven by a targeted benefit at retirement rather than an annual contribution cap, permitted contributions can substantially exceed defined contribution limits, and they rise with age.
The trade-offs are real: an actuary each year, higher administration, a funding commitment that is not discretionary, and mandatory contributions for staff. It suits a practice with stable, high profitability and an owner within striking distance of retirement. It is a poor fit for volatile income.
How the decision actually gets made
Four inputs drive it:
- Practice profitability, and how stable it is. Stability matters more than the level for the defined benefit options.
- Your staff census. How many, how old, how long tenured. This determines what any design actually costs you.
- Your age and horizon. Contribution capacity in a cash balance plan rises sharply with age.
- What you want the deduction for. Maximum deduction and maximum retirement saving are related but not identical goals.
The deadline nobody flags in time
Some plans can be established after year end and funded up to the filing deadline. Others must exist before December 31 to count for that year.
Practices that start this conversation in February have already lost a year. If plan design is on your list for this tax year, it belongs on the September or October agenda, not the March one.
Talk it through with a Fresno CPA
We model plan options against your actual census and profitability, and coordinate with a third party administrator on the design. See our medical and dental practice accounting page.
Schedule a meeting or call 559-372-9213.
This post is general information, not advice for your specific situation. Tax figures are current for the year stated and many are indexed annually. Talk to a CPA before acting on any of it.
