Tax Consequences of Selling Your Optometry Practice

Selling your optometry practice is one of the most significant financial events of your career—and getting it wrong can leave you with a painful tax bill. Whether you’re planning to retire, pivot into a new career, or transition to a different role within your own practice, understanding the tax consequences of the sale is critical for protecting your financial future.

As a financial advisor who works closely with optometry practice owners, I’ve helped guide clients through this complex process step by step. In this post, I’ll break down the key tax considerations of selling your practice—including capital gains tax, stock sale vs. asset sale, rollover equity, installment sales, and more—so you can approach the selling process with clarity and confidence.

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Finding the Right Buyer for Your Optometry Practice

One of the most important parts of the selling process is identifying the right buyer. Potential buyers range from younger optometrists seeking ownership, to regional medical groups, to national private equity groups expanding into ophthalmic practices. Each type of buyer comes with different expectations for deal structure, valuation, and transition terms.

Start by clarifying your goals: Are you looking to retire completely or stay on in a reduced role? Do you want to prioritize continuity of patient care, protect your staff, or simply maximize the sale price? Your ideal buyer should align with your personal and professional values.

Working with a practice broker who knows the optometric practices market can help you confidentially market your practice to prospective buyers, field multiple offers, and negotiate favorable terms. The right match leads to a smooth transition—and a better overall outcome.

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What’s the Typical Sales Price for an Optometry Practice?

The value of your practice will vary depending on several factors, including:

• Annual revenue and profitability

• Location and demographics

• Condition and age of equipment

• Strength of your staff and systems

• Your personal involvement in day-to-day operations

As a rule of thumb, most optometry practices sell for between 60% to 80% of gross revenue, though higher multiples may be possible for well-run practices with strong cash flow and solid growth potential. Practices with outdated technology, declining revenue, or regulatory issues often command lower valuations.

Keep in mind: fair market value is what a willing buyer and seller agree to—so timing, market conditions, and negotiation play a significant role.

First Things First: Understand the Structure of Your Sale

The way your optometry practice is sold has major tax implications. Most transactions are structured as either an asset sale or a stock sale (also known as a share sale).

Asset Sale

In an asset sale, the buyer purchases specific assets of the practice—such as equipment, goodwill, patient records, and leasehold improvements—rather than the legal entity itself.

Tax considerations:

• You’ll likely pay ordinary income tax on certain assets (like depreciated equipment).

• Goodwill, which often makes up the bulk of the purchase price, is typically taxed at long-term capital gains rates.

• If your practice is structured as a C corporation, you could face double taxation—once at the corporate level and again when profits are distributed to you personally.

Stock Sale

In a stock sale, the buyer purchases your ownership interest in the practice’s legal entity (such as an S corporation or C corporation).

Tax considerations:

• Most of the proceeds are taxed at the more favorable capital gains rate.

• The buyer inherits your entity’s liabilities, making this less appealing to many prospective buyers unless you’ve kept immaculate financial records and maintained regulatory compliance.

Which Is Better?

Buyers tend to prefer asset sales because of the tax deductions they receive by depreciating the assets over time. Sellers generally favor stock sales for the better tax treatment. Choosing the right structure is a critical step in minimizing your tax liability and maximizing your bottom line.

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Capital Gains Tax: What You Need to Know

The capital gains tax applies to the sale of intangible assets like goodwill and patient lists. If you’ve owned your practice for more than one year, those gains will typically be taxed at the long-term capital gains rate, which is often significantly lower than ordinary income rates.

The key to minimizing taxes here is in the allocation of the purchase price. A higher allocation to goodwill benefits you as the seller. However, buyers may push for a different allocation to maximize their tax deductions, so this becomes a negotiation point during the sale process.

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Installment Sales: A Way to Spread Out the Tax Hit

An installment sale allows you to spread out payments—and your tax liability—over multiple years.

Benefits:

• Helps reduce your taxable income in the year of sale.

• Smooths out cash flow and may reduce your overall tax bracket exposure.

Risks:

• You’re taking on the credit risk of the new owner.

• You’ll need a clear promissory note and legal agreement.

A careful planning strategy with your financial and tax advisors is essential to ensure this works in your favor.

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Rollover Equity: When Selling to Private Equity or a Corporate Group

If you’re selling to a private equity group or larger corporate entity, you may be offered rollover equity—meaning you retain a percentage of ownership in the new entity.

This can be a powerful tool for creating future upside, especially if the buyer plans to grow the platform and eventually sell at a higher valuation.

However, this strategy raises important tax and liquidity considerations:

• No immediate cash for the rolled equity portion.

• Potential complicated tax treatment depending on the structure.

• You’ll need a clear understanding of the exit strategy and your rights as a minority owner.

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Real Estate and Tax Coordination

If you own the real estate where your practice operates, you may choose to sell it along with your practice or lease it back to the new owner. This has tax implications of its own.

• Selling the property triggers a capital gain on the sale of the real estate. If held longer than a year, this is taxed at long-term capital gains rates.

• If structured properly, a 1031 exchange may allow you to defer gains by reinvesting in another property.

Also, coordinate this with other planning strategies like the Pass-Through Entity Tax (PTET) election if you operate as an S corporation and want to reduce federal tax liability by deducting state taxes at the entity level.

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Retirement Planning: What Comes Next?

The sale of your practice could be the catalyst to fully fund your retirement plan, transition to part-time work, or start a new business.

Make sure you:

• Project your after-tax proceeds from the sale.

• Coordinate with your financial advisor to update your retirement income plan.

• Consider Roth conversions, charitable strategies, and ways to minimize Required Minimum Distributions (RMDs).

 

Why You Need a Financial Advisor to Plan What’s Next

Selling your optometry practice isn’t just about getting the highest purchase price—it’s about setting yourself up for a secure future.

At Arch Financial Planning, we work closely with optometrists to:

• Project your after-tax proceeds

• Develop a long-term investment strategy tailored to your retirement plan, risk tolerance, and cash flow needs

• Evaluate Roth conversions, charitable giving, and tax-saving opportunities

• Avoid common pitfalls like over-concentration, poor withdrawal strategies, or underestimating lifestyle expenses

This is more than a transaction—it’s a transition into the next phase of your life. Let us help you do it with purpose.

 

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Common Pitfalls to Avoid

Avoid these tax traps that can eat into your hard-earned equity:

• Poor recordkeeping: Buyers want clean financial statements, tax returns, and compliance reports.

• Improper valuation: Underestimating the value of your practice can lead to a lower sales price—and lower future security.

• Ignoring local taxes: Don’t forget about state and local tax laws. They can vary dramatically and impact your final tax bill.

• Waiting too long: Market conditions, buyer interest, and your practice’s financial performance all affect valuation. The best time to sell is when your metrics look strong, not when you’re already burned out.

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Tax Planning Starts Early

The biggest mistake optometry practice owners make is waiting until the offer is in hand to think about taxes. In reality, smart tax planning starts months—if not years—in advance.

Working with a financial advisor and a practice broker early in the selling process allows you to:

• Prepare your books and depreciation schedule

• Strategically allocate the sales price

• Decide on the best structure (LLC, S corp, sole proprietorship)

• Ensure a smooth transition that maximizes your value and minimizes surprises

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Let’s Build Your Exit Strategy—Together

At Arch Financial Planning, we’re financial advisors specialize in helping optometry practice owners build intentional, tax-savvy exit strategies that maximize financial outcomes.

Whether this is your first time selling a practice or you’re simply exploring options, I can help guide you through the sale of your practice step by step—from valuation to tax planning to retirement readiness.

Ready to Get Personalized Advice?

👉 Schedule a free consultation to review your benefits selections, coordinate your retirement plan options, and ensure your financial future is on track.

Arch Financial Planning is a fee-only financial advisor headquartered in downtown Athens, GA