Selling Your Practice Doesn't Just Trigger a Tax Bill the Year You Sign. It Triggers Another One Two Years Later.
I started my career in PwC's private client tax group before I ever touched a portfolio, so I tend to look at a transaction the way an accountant does first and an advisor second. A practice sale is the clearest example I see of why that matters. Most physicians selling a practice, whether it's an outright sale or rollover equity into a private equity roll-up, focus on the headline number and the capital gains tax that comes with it. That's real money, but it's often not the most expensive mistake sitting inside the deal.
Physicians are classified by the IRS as a specified service trade or business, which means the 20% Section 199A deduction on qualified business income phases out as taxable income rises, and for 2026 it's fully gone once taxable income clears $276,750 for a single filer or $553,500 for a married couple filing jointly. A practice sale in your final year of ownership often pushes that year's income well past those thresholds, which means the deduction you may have been counting on for years quietly disappears in the exact year the deal closes. That's cost number one, and it's visible immediately.
The Cost That Shows Up Two Years Later
Cost number two doesn't show up until later, and almost nobody connects it back to the sale. Medicare's income-related monthly adjustment amount, IRMAA, is based on your tax return from two years prior. A large one-time gain from a practice sale doesn't touch your Medicare premium the year it happens. It touches it two years later, often right as you're actually enrolling in Medicare for the first time, and the surcharge can run from a few hundred dollars a month to nearly $500 a month in the top bracket, for both you and your spouse, for that one premium year. I've seen physicians assume this is appealable after the fact. It generally isn't. The appeal form, SSA-44, exists for specific income drops, like a job loss or the death of a spouse, not for a one-time gain you chose to realize. The only real lever is managing the timing of the sale itself, before it happens, not after.
None of this means don't sell, or don't take the deal. It means the sale should be planned with the QBI phase-out and the IRMAA lookback sitting on the same spreadsheet as the purchase price, not treated as separate problems for separate years. Structuring the deal, timing the closing, and layering in tools like a cash balance plan funded ahead of the sale can meaningfully change what actually lands in your pocket versus what the calendar quietly takes from you two years after you've already moved on. If you're a practice owner within five years of a sale or a PE roll-up, this is worth modeling now, while there's still time to change the outcome.