Capital gains tax expected to rise

Optometrists who are considering selling their practice next year may want to speed up their plans.

Optometrists who are considering selling their practices next year may want to speed up their plans.

Meanwhile, acting House Ways and Means Chairman Sander Levin (D-MI) said his committee will try to extend those middle class tax cuts in 2011 for individuals who earn less than $200,000 a year or households with annual incomes under $250,000 and let lower tax rates lapse for high-earners. But that could spell trouble on the Senate floor.

Prepare now to sell later

To play it smart, Scott Daniels suggested that optometrists should start grooming their practice now for a future sale. Daniels is a practice broker and industry consultant in Costa Mesa, CA, who co-owns Practice Concepts with his wife Alissa Wald, OD, a practice owner.

When selling a practice, there are different classifications of assets that make up the sale price, such as equipment, inventory, a non-compete clause, and goodwill. He says each category is assigned a tax rate.

Goodwill, which usually represents the highest percentage of the total sale price, is currently taxed at the federal rate of 15%. But paying another 5% can translate to thousands of more dollars in taxes.

As an example, Daniels points to a practice that sells for $400,000. If 60% of that practice ($240,000) represents goodwill, instead of paying $36,000 in federal taxes under the current tax rate, sellers would have to pay $48,000 after the new tax rate kicks in.

"If optometrists are not reinvesting in their business, growing their revenue and profits, the future value of their practice will decline," Daniels said. He added that the process could take 3 to 5 years. "The increase in capital gains tax combined with a lower valued sale price will just hit even harder, so owners must be committed, completely energetic, and engaged."