Tax Implications of Selling an Optometry Practice (2026)

Tax Implications of Selling an Optometry Practice (2026)

Selling your optometry practice, a decision representing decades of work, responsibility and leadership that most people outside the profession will never fully understand and is one of the most important financial decisions you will ever make.

At DVMElite, we speak with practice owners every week and what makes this decision difficult is rarely retirement itself. Most owners tell us they are ready for a new chapter. What makes it hard is that they remember what it took to build the clinic into what it is today. You learned marketing, vendor negotiations and insurance processes even though none of that was covered in optometry school. You figured it out because your community depended on you and over time the practice became part of your identity.

So when you finally receive an offer, it is completely natural to focus on the purchase price because that number feels like recognition for everything you carried.

But the number in the offer is not the number you keep. Owners feel good about the offer and only later realize that structure and allocation matter just as much as the top line number. That is why tax planning should happen before you sign a letter of intent and not after you are already emotionally committed to a deal. Once you become attached to a number it becomes harder to renegotiate structure even if the math tells you that you should.

Asset Sale vs Stock Sale in Optometry Practice sale

Most optometry practices are sold as asset sales which means the buyer is purchasing the individual assets of the clinic rather than your legal entity. That usually includes equipment, inventory, furniture, leasehold improvements and goodwill which represents your patient relationships and reputation in the community.

Each of those categories is taxed differently and that difference directly affects what you take home.

If part of the purchase price is assigned to equipment that has already been depreciated then some of that gain may be taxed at ordinary income rates because of depreciation recapture. Goodwill usually qualifies for lower capital gains tax rates. This means that even if the sale price doesn't change, the actual cash you keep depends entirely on how the deal is structured and where the value is assigned.

In a stock sale the buyer purchases your ownership interest in the entity itself. In many situations that allows the gain to be treated more uniformly as capital gains which can be favorable for the seller. Buyers usually push for asset sales because they don't want to get stuck with your old legal baggage or past billing mistakes. It's a safety move for them but here’s the catch: what protects the buyer often spikes your tax bill. If you don't look at the structure carefully before signing, you’re the one paying for their peace of mind.

That tension is part of the negotiation and it should be evaluated early rather than rushed at the end.

Here's a detailed blog post - Asset Sale vs Stock Sale in Optometry

Purchase Price Allocation

Once the total price is agreed upon it must be allocated across specific categories and that allocation is documented in the purchase agreement. Many owners assume that once the number is set the rest is procedural but allocation can meaningfully change your tax structure.

For instance, if you sell for $2 million and let the buyer put a huge chunk of that into your old, depreciated equipment, you’re in for a shock. The IRS treats that money as a 'recapture' of your old tax breaks, meaning they tax it at your high ordinary income rate not the lower capital gains rate you were probably counting on.

On the other hand, if you shift more of that value into goodwill, more of the gain qualifies for capital gains treatment. The total price hasn't changed by a single penny, but the amount of cash you actually get to keep changes completely.

We’ve seen this play out in real life: by making thoughtful adjustments to the allocation, the seller walked away with a much better outcome without the buyer having to pay a cent more. The buyer paid the same amount, but the seller kept more because they looked at the structure before it was too late.

Allocation is not paperwork detail. It is one of the most significant financial levers in the entire transaction.

Depreciation Recapture

Over the years you likely claimed depreciation on exam equipment, diagnostic tools and improvements. Those deductions lowered your taxable income while you operated the practice and provided real benefits at the time. But when you sell a portion of that prior benefit may be recaptured.

Depreciation recapture means that part of the gain on those assets can be taxed at higher ordinary income rates instead of capital gains rates. Many owners assume the entire sale will be taxed at capital gains rates and are surprised when that is not the case.

If recapture is significant and not modeled in advance the difference between the expected and actual net proceeds can feel frustrating even though nothing has changed about the purchase price itself. Understanding this before negotiations progress gives you clarity and prevents last minute surprises.

Entity Structure and State Taxes

Your entity structure also matters.

If your practice operates as an S corporation or LLC the tax impact may differ from a C corporation. In certain C corporation asset sales there is potential for double taxation if the transaction is not structured properly because the corporation may pay tax on the gain and then shareholders may pay tax again when funds are distributed.

Not every situation results in double taxation but it must be evaluated early because if it applies it can materially reduce net proceeds.

State taxes also vary. Federal analysis alone is not enough because state income tax can add another layer of cost depending on where your practice is located. A proper review includes both federal and state exposure so you understand the full picture.

Earn Outs and Deferred Payments

If part of your transaction includes seller financing or an earn out then timing becomes just as important as rate.

When payments are received over time tax treatment depends on how the agreement is structured and whether installment sale rules apply. If planned carefully taxes may be spread out as payments are received which can help manage cash flow. If not structured correctly you may owe taxes before collecting the full proceeds.

Cash flow matters. Paying tax on income you have not yet received creates unnecessary pressure at a stage when you are trying to simplify your life.

Income After the Sale

If you remain involved after closing your income profile will likely change.

As an owner you may have taken distributions in a tax efficient way. As an employee your compensation will typically be wages subject to payroll taxes and withholding. That shift can affect your annual tax planning and overall flexibility.

Some owners underestimate how different their financial structure looks once ownership transitions to employment. Planning for that shift allows you to evaluate whether a longer employment agreement aligns with your goals.

Bringing It All Together

The purchase price is only the starting point because what truly determines your outcome is how the transaction is structured and how the value is allocated across asset categories and when payments are recognized for tax purposes. Structure influences overall exposure, allocation determines which portions are taxed at different rates and timing shapes how and when cash actually reaches you.

Two practice owners can sell for nearly identical amounts and walk away with very different results simply because one evaluated tax implications early and the other focused only on the headline number.

You spent decades building your practice and your exit should reflect that same level of thought. Careful tax planning ensures that the financial outcome aligns with the years you invested into growing your clinic.

If you are beginning to explore a sale it makes sense to review your tax exposure now so that when a serious offer arrives you are prepared and confident rather than surprised.

At DVMelite we are your partner for success. Even if you are years away from selling we recommend reaching out to start the conversation. Preparation creates options and options create confidence.

Here is what other practice owners have said about working with us.

This is the most amazing community of smart committed positive professionals I have ever had the pleasure of working with.  Not only has DVMELITE grown me professionally they have also contributed a huge amount personally.  I feel I have found a family with this group and can not recommend more highly! - Suzanne May

DVM Elite is totally invested in the success of my practice. They are knowledgeable and resourceful. They listen before they advise. They understand that every practice is not the same and base strategy on your demographics and practice style - Kirk Vardeman

The amazing DVMELITE team has helped me peel back every layer of limiting belief to enable me to build and lead my team with humility and passion.  Together we have created a solid and enduring foundation for  my veterinary practice. A feeling that is shared by the entire Armitage Team!  Profuse gratitude to you, for working tirelessly to make a career dream come true.- Leslie Trovato

We highly recommend you to get a free valuation of your practice by filling the below form and once that it done, you will be redirected to our Transitions expert calender and you can book a complementary free consultation, the goal of this call is not to sell any thing rather to answer all your questions and concerns.

Disclaimer -

This content is for informational purposes only and should not be considered legal or tax advice.