Tax Elections: Small Choices That Can Make a Big Difference for Pharmacy and Clinic Owners

When most business owners think about taxes, they think about forms, deadlines, and hoping the number at the bottom isn’t painful. What often gets overlooked is that many parts of a tax return are not automatic. They are elections, meaning choices. And those choices can directly impact how much tax you pay.

For independent pharmacy owners and healthcare clinic owners, these decisions matter even more because income levels, entity structures, and personal finances tend to change year to year.

Here are several common tax elections that can create savings when they are handled intentionally.

1. Filing status: Married filing jointly vs separately

Most married couples file jointly, and in many cases that works out fine. But not always.

For example, if one spouse has significant medical expenses and the other does not, filing separately can sometimes allow more of those expenses to be deducted. This is because medical deductions are limited based on a percentage of adjusted gross income. A lower income on one return can make more of those expenses eligible.

This is a good example of a decision that should be evaluated, not assumed.

2. Education-related tax benefits

Many pharmacy and clinic owners are paying for college for their children. The tax code offers multiple ways to get relief for education costs, including credits and deductions.

The challenge is that:

• You usually can’t take all of them

• Each option has different income limits

• The “best” option changes depending on your total income for the year

Choosing the wrong one can mean leaving money on the table. Choosing the right one requires running the numbers before the return is finalized.

3. Investment interest and how it’s treated

Some owners borrow to invest, whether through margin accounts or other investment loans. The interest on those loans can be deductible, but only up to the amount of certain types of investment income.

There is also an election that allows you to include specific capital gains to increase that deduction. The tradeoff is that doing so may reduce the favorable tax treatment of those gains.

This is not an automatic decision. It’s a strategy decision that depends on the bigger picture of your income and tax rates.

4. Installment sales and timing income

If you sell an asset such as real estate, a portion of a pharmacy, or another business interest and receive payments over multiple years, the tax can often be spread out over those years.

That can be helpful, especially if income is expected to be lower in future years.

However, there are situations where electing out of installment treatment and paying the tax sooner actually results in less total tax paid.

Again, timing matters.

5. Entity structure elections: S-corp vs partnership

This is especially common among pharmacy and clinic owners.

Electing to be taxed as an S-corporation versus a partnership can affect:

• Payroll taxes

• How income is reported

• Retirement contributions

• Long-term planning when ownership changes or a business is sold

There is no universally “better” option. The right choice depends on profitability, ownership structure, and future plans. What worked when revenue was lower may not be the best structure today.

This matters because:

Tax elections are not loopholes or aggressive strategies. They are built into the tax code, but they only work if they are reviewed deliberately.

Filing a return without revisiting these decisions often means defaulting into choices that may not be optimal. Over time, those small decisions can add up to real dollars.

This is why tax planning matters, especially for pharmacy owners and healthcare providers whose financial situations are rarely static.

At Medari Advisors, we believe your tax return should reflect thoughtful decisions, not assumptions.

If you have questions about this topic, speak with your CPA or accountant. And if you need guidance or a second opinion, you’re always welcome to contact us.