Anesthesiologist Tax Playbook
The complete tax planning guide for anesthesiologists and CRNAs in private practice, locum tenens, and employed settings — covering S-Corp structuring, retirement mega-contributions, locum tenens travel deductions, and SSTB QBI limitations for 2026.
The Anesthesiologist Tax Landscape
Anesthesiologists are among the highest-paid physicians in the United States, with median compensation ranging from $350,000 to $550,000 depending on practice setting, geography, and subspecialty. The income structure varies significantly: hospital-employed anesthesiologists receive W-2 income with limited self-employment planning options, while private practice anesthesiologists and locum tenens providers receive 1099 income with access to the full suite of self-employed tax strategies.
The tax planning opportunity for a $450,000 1099 anesthesiologist is substantial. Without planning, the effective federal marginal rate on the top dollar of income exceeds 40.7% (37% + 3.8% NIIT + 0.9% Additional Medicare Tax). With a properly structured S-Corp, Solo 401(k), and cash balance defined benefit plan, the same anesthesiologist can reduce taxable income by $200,000–$320,000 annually, generating $80,000–$120,000 in annual tax savings. The planning tools are straightforward and well-established — the challenge is ensuring they are implemented correctly and documented properly.
The anesthesiologist's income structure also creates unique issues around the §199A qualified business income deduction. Anesthesiology is a specified service trade or business (SSTB) under the regulations, meaning the 23% QBI deduction (OBBBA increased from 20%) phases out at the 2026 threshold of $394,600 (MFJ) and is eliminated above $494,600 (MFJ). Most anesthesiologists are above the complete phase-out threshold, making retirement plan contributions the primary lever for reducing taxable income below the threshold.
Entity Structure: S-Corp for 1099 Anesthesiologists
For anesthesiologists with $200,000+ in net 1099 income, the S-Corp election under §1361–§1362 is the foundational planning step. The S-Corp pays the anesthesiologist a reasonable W-2 salary (typically $200,000–$280,000 based on employed anesthesiologist benchmarks from MGMA data) and distributes the remainder as S-Corp dividends not subject to FICA or the Additional Medicare Tax.
At $450,000 net income with a $220,000 reasonable salary, the FICA savings calculation: FICA on the salary is approximately $25,000 (Social Security on the first $184,500 at 15.3% + Medicare on all wages at 2.9%). The remaining $230,000 in distributions avoids FICA entirely, saving approximately $13,300 in Medicare taxes annually. The Additional Medicare Tax (0.9%) on wages above $200,000 adds further savings on the distribution portion.
S-Corp FICA Savings: $450,000 Net Income Anesthesiologist
| Scenario | FICA Exposure | Annual Savings |
|---|---|---|
| Sole Proprietor | Full SE tax on all income | Baseline |
| S-Corp, $220K salary | FICA on salary only | ~$13,300/yr |
| S-Corp, $200K salary | FICA on salary only | ~$14,500/yr |
Reasonable salary must be documented with MGMA or ASA compensation survey data. Anesthesiologist employed compensation benchmarks: $300,000–$450,000 depending on subspecialty and geography.
State licensing requirements: most states require anesthesiologists to operate through a Professional Corporation (PC) or Professional Limited Liability Company (PLLC). The S-Corp election is available for both structures. Practitioners should verify state professional entity requirements before forming the entity and confirm that the state recognizes the federal S-Corp election for state tax purposes (most do, but a few states — notably New York and New Jersey — have separate S-Corp election requirements).
Retirement Plan Stack: Maximizing Pre-Tax Contributions
The retirement plan stack for anesthesiologists follows the same architecture as for radiologists and other high-income physicians: Solo 401(k) as the foundation, cash balance defined benefit plan as the multiplier, and backdoor Roth IRA for tax-free growth.
Retirement Stack: 50-Year-Old Anesthesiologist, $450,000 Net Income
| Plan | 2026 Contribution | Tax Savings (37%) |
|---|---|---|
| Solo 401(k) — employee deferral (age 50+) | $30,500 | $11,285 |
| Solo 401(k) — employer profit sharing (25% of $220K W-2) | $55,000 | $20,350 |
| Cash Balance Defined Benefit Plan (age 50) | $180,000 | $66,600 |
| Backdoor Roth IRA | $7,500 | $0 (tax-free growth) |
| Total | $273,000 | $98,235 |
The cash balance plan requires an enrolled actuary and a minimum three-year commitment. Annual administration costs are $5,000–$15,000 — well justified at these contribution levels. The plan must cover all eligible employees of the S-Corp, which is why most anesthesiologists structure their professional entity to minimize non-physician employees. The enrolled actuary calculates the permissible contribution range each year based on the projected benefit at retirement age and current interest rate assumptions.
For anesthesiologists who also have W-2 income from a hospital employer, the employee deferral limit ($24,500 or $30,500 with catch-up) is shared across all plans. If the hospital 401(k) has already absorbed the full employee deferral, only the employer profit sharing contribution is available in the Solo 401(k). The cash balance plan contribution is separate and unaffected by the 401(k) deferral limit.
Locum Tenens and Travel Expense Planning
Many anesthesiologists supplement their primary income with locum tenens assignments at hospitals, surgery centers, or pain management clinics. The travel expense deduction rules under §162(a)(2) apply: expenses are deductible if the anesthesiologist is away from their tax home for a temporary assignment (expected to last less than one year).
The tax home for an anesthesiologist is their principal place of business — typically their primary practice location. If the anesthesiologist has no fixed primary practice and works exclusively on locum tenens assignments, the IRS may argue there is no tax home and deny travel deductions entirely. Practitioners should ensure locum tenens clients maintain a primary practice location or home base that qualifies as a tax home.
Locum Tenens Travel Deduction: 2026 Rates
| Expense | Deduction Rule | 2026 Rate/Limit |
|---|---|---|
| Airfare / transportation | 100% deductible | Actual cost |
| Lodging | 100% deductible | Actual cost (reasonable) |
| Meals (actual) | 50% deductible | Actual cost × 50% |
| Meals (per diem) | 50% deductible | $68–$92/day × 50% |
| Mileage | 100% deductible | $0.70/mile (2026) |
| Rental car | 100% deductible | Actual cost |
Deductible Business Expenses for 1099 Anesthesiologists
Common Deductible Expenses — 2026
| Expense Category | IRC Authority | Notes |
|---|---|---|
| Medical malpractice insurance | §162 | Fully deductible; tail coverage also deductible |
| State medical license fees | §162 | All states where licensed |
| DEA registration | §162 | Annual renewal deductible |
| Board certification fees | §162 | ABA initial and recertification fees |
| CME courses and conferences | §162 | Must maintain existing skills; ASA annual meeting |
| Anesthesia equipment / monitors | §179, §168(k) | 100% bonus depreciation in 2026 under OBBB |
| Professional association dues | §162 | ASA, state anesthesia society |
| Health insurance premiums | §162(l) | Self-employed health insurance deduction (above-the-line) |
| Disability insurance premiums | §162 | Deductible as business expense for 1099 providers |
The self-employed health insurance deduction under §162(l) is particularly valuable. The deduction covers premiums paid for health, dental, vision, and long-term care insurance for the anesthesiologist and their family. It is an above-the-line deduction that reduces adjusted gross income, which in turn can reduce the SSTB phase-out calculation for the QBI deduction. The deduction is limited to net self-employment income and is not available for any month the anesthesiologist was eligible for employer-subsidized health insurance.
Frequently Asked Questions
Yes, if net 1099 income exceeds $200,000. At $450,000 net income with a $220,000 reasonable salary, the S-Corp saves approximately $13,300 in FICA taxes annually. The S-Corp also enables employer contributions to the Solo 401(k) based on W-2 wages, which are larger than the SEP-IRA contribution based on net self-employment income. Document the reasonable salary determination with MGMA or ASA compensation survey data each year.
Yes — anesthesiology is the practice of medicine and is an SSTB under §199A(d)(1)(A). The QBI deduction phases out for anesthesiologists with taxable income above $394,600 (MFJ) in 2026 and is completely eliminated above $494,600 (MFJ). The primary workaround is reducing taxable income below the threshold through retirement plan contributions. A $450,000 anesthesiologist who contributes $273,000 to retirement plans reduces taxable income to $177,000 — well below the phase-out threshold and potentially eligible for the full 23% QBI deduction (OBBBA increased from 20%).
Yes, for 1099 anesthesiologists. Disability insurance premiums are deductible as a business expense under §162 for self-employed individuals. However, if the premiums are deducted as a business expense, any disability benefits received are taxable income. If the premiums are paid with after-tax dollars (not deducted), the benefits are tax-free. Most high-income anesthesiologists prefer to pay premiums with after-tax dollars to keep the benefits tax-free — the tax-free benefit is worth more than the deduction at the 37% bracket.
The reasonable salary must reflect what the anesthesiologist would earn as an employed anesthesiologist performing the same services. The ASA (American Society of Anesthesiologists) and MGMA publish annual compensation surveys. Employed anesthesiologist compensation typically ranges from $300,000–$450,000 depending on subspecialty (general, cardiac, pediatric, pain management) and geography. For S-Corp planning, practitioners typically set the salary at the lower end of the reasonable range to maximize distributions — but the salary must be genuinely defensible. Document the determination annually.
The 0.9% Additional Medicare Tax applies to wages and self-employment income above $200,000 (single) or $250,000 (MFJ). The S-Corp structure reduces AMT exposure by converting earned income to S-Corp distributions not subject to the AMT. The 3.8% NIIT applies to passive income above the same thresholds — separate from the AMT and applies to investment portfolio income regardless of entity structure. Combined, the marginal rate on the top dollar of earned income for an anesthesiologist without planning can reach 41.6% (37% + 3.8% NIIT on investment income + 0.9% AMT on wages above $200K).
More Tax Planning FAQs
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Learn How to Implement ThisThe information on this page is intended for licensed tax professionals (CPAs, EAs, and tax attorneys) and is provided for educational and research purposes only. Tax law is complex and fact-specific — all strategies discussed are subject to limitations, phase-outs, and conditions that may not apply to every client situation. Practitioners should independently verify all information against current IRS guidance, Treasury Regulations, and applicable state law before advising clients. This content does not constitute legal or tax advice.
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