veterinary financial guide
How veterinary practices can save on taxes in 2026
If you’re a veterinary practice owner in the United States or Canada, the upcoming 2026 tax season offers several opportunities to reduce your tax burden—but only if you start planning before 2025 comes to an end.
This guide explains key tax incentives and deductions for veterinary practices to take advantage of before the new year. While this is not a substitute for personalized tax advice from a qualified professional, it will give you a practical overview of what your specific practice can focus on.
Veterinary tax information & tips
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Why business structure and entity type matter
Tax incentives and deductions
Practical
planning tips
Costly mistakes
to avoid
Year-end checklist
for 2025
number 1
Why business structure and entity type matter
United States
- Many veterinary practices in the U.S. operate as sole proprietorships, partnerships, LLCs, or S-corporations.
- If your clinic operates as a “pass-through” business (e.g., LLC treated as partnership, or S-corp), owners may qualify for the Qualified Business Income (QBI) deduction, allowing up to 20% of qualified business income to be deducted. However, it’s essential to review your specific practice’s eligibility each year.
Canada
- Many Canadian veterinary practices are incorporated as a Professional Corporation (PC) or Veterinary Professional Corporation (VPC). This structure often allows lower corporate tax rates on “active business income” (ABI), as a result of the small business deduction.1
Key takeaway: Be sure to confirm your entity structure and revisit it each year, since it determines what tax incentives you can use and how they apply to your veterinary clinic.
number 2
Tax incentives and deductions
veterinary clinics should know
Here are some important areas where veterinary practices can reduce income tax or benefit from favourable tax treatment.
”Placed in Service” timing and “Ordinary and Necessary”
One of the most effective ways to reduce your taxable income for the upcoming 2026 season is to invest in equipment, software, and facility build-outs before the end of 2025. This strategy takes advantage of accelerated depreciation tax incentives, such as the Section 179 Deduction (U.S.) or Capital Cost Allowance (Canada)—both of which allow veterinary practices to write off qualifying purchases in the year they’re made rather than spreading the expense over several years.
Placed in Service means the asset is ready and available for use by year-end (2025) if you want the deduction for that tax year. Delaying could defer the deduction to the next year.
Ordinary and Necessary is criteria set in place by the IRS to determine if a business expense qualifies as a tax deductible. An ordinary expense is one that is common and accepted in your industry, while a necessary expense is one that is helpful and appropriate for your business. The IRS notes that an expense does not have to be indispensable to be considered necessary.
Under this criteria, here are examples of expenses that may qualify as tax deductions for veterinary practices:
- Veterinary diagnostic or imaging equipment
- Practice management software (like ezyVet or Shepherd)
- Computers, tablets, and office hardware
- Client communication platforms (e.g., PetDesk Communications)
- Renovations or improvements to leased facilities
- Vehicle and other necessary purchases used for mobile veterinary services
- Rent, utilities, supplies, lab consumables, minor equipment repairs
- Employee wages, benefits, payroll taxes
- Licensing fees, continuing education, professional memberships
- Marketing/advertising, website development, software subscriptions
- Vehicle/mileage costs for mobile or house-call services (with proper records)
Real-World Example:
A U.S.-based animal hospital plans to modernize its operations for 2026. In November 2025, they invest $75,000 in new digital X-ray equipment and $10,000 in upgraded practice management software.
As long as these investments qualify as “Ordinary and Necessary” and are placed in service before December 31, 2025, the clinic can claim a tax deduction on both purchases for the 2025 tax year.
- Total qualifying expenses: $85,000
- Immediate deduction under Section 179: $85,000
- Estimated federal tax savings: ~$17,850 (assuming a 21% business tax rate)
Not only does the clinic reduce its 2025 tax bill—it also starts 2026 with better diagnostic capabilities, improved workflow efficiency, and more satisfied clients.
Note: This does not constitute legal or tax advice. Please consult a qualified tax professional familiar with veterinary practice operations for advice specific to your clinic and jurisdiction.
Sales of goods vs. professional services and tax treatment
For veterinary practices that sell supplies, food, medications, retail pet products, the mix of services and goods can complicate tax treatment.
- In the U.S., some states treat veterinary services differently from retail goods when it comes to sales tax or use tax. Be sure your clinic knows whether the products you sell trigger sales tax collection or exemptions.
- For services vs goods in Canada, there are GST/HST implications and input tax credit (ITC) opportunities for clinics that pay GST/HST on purchases.2
number 3
Practical planning tips
ahead of the 2026 tax season
Here are actionable steps veterinary clinic owners should consider to get ahead before filing for the 2025 tax year in 2026.
Estimate your clinic’s 2025 profit now. Understanding your expected taxable income helps you decide whether to accelerate expenses or investments.
Schedule large equipment purchases wisely. If you’re buying imaging equipment or upgrading your exam rooms, aim for being placed in service before December 31, 2025 in the U.S. so you can deduct earlier.
Review your business structure. If your clinic has grown, added services, changed ownership, or shifted into retail products, revisit whether your current entity remains tax-optimal.
Separate business and personal finances. Having dedicated business bank accounts and bookkeeping helps ensure accuracy, audit readiness, and proper deduction tracking.
Keep excellent records. Save receipts, invoices, purchase dates, placed-in-service dates, mileage logs (for mobile work), and clearly categorize service income vs goods income.
Understand your product sales tax obligations. If you sell pet food, medications, retail supplies, ensure your clinic is compliant with state/provincial sales tax or GST/HST rules.
Use retirement-planning strategies. Practice owners and staff may benefit from retirement plan contributions (U.S. SEP or 401(k); Canada RRSP/corporate pension) which reduce taxable income.
Meet with a tax advisor experienced in veterinary practices. Because veterinary clinics have a unique mix of services + retail + equipment costs, using an advisor who understands the field can capture more opportunities and avoid pitfalls.
number 4
Costly mistakes to avoid
Here are actionable steps veterinary clinic owners should consider to get ahead before filing for the 2025 tax year in 2026.
Delaying equipment purchases past year-end and losing a deduction for that tax year. It’s not too late to invest in technology by taking advantage of end-of-year promotions (be on the lookout for savings from PetDesk before 2026)!
Mixing personal and business expenses, making audit-support difficult.
Assuming all costs related to veterinary services are deductible.
Delaying equipment purchases past year-end and losing a deduction for that tax year. It’s not too late to invest in technology by taking advantage of end-of-year promotions (be on the lookout for savings from PetDesk before 2026)!
Mixing personal and business expenses, making audit-support difficult.
Assuming all costs related to veterinary services are deductible.
Neglecting sales tax/consumption-tax compliance for retail goods sold from the clinic.
Poor record-keeping. Without proper documentation (invoices, placed-in-service dates, logs), deductions may be ineligible.
Failing to revisit entity structure despite business growth or major changes.
number 5
Year-end checklist for 2025
(to file in 2026)
Here’s a simple checklist you can follow as 2025 winds down to prepare for the 2026 tax filing season.
Review planned equipment or software purchases; confirm they will be placed in service by Dec 31, 2025 (U.S.).
Enter all business expenses into your accounting system; gather receipts for supplies, utilities, rent, salaries, licensing, continuing education, and so on.
Track product sales vs service income; review sales tax or GST/HST obligations.
Review your entity type and owner/employee compensation structure (especially if you are S-corp, LLC, corporation).
Set aside funds for estimated taxes if your clinic profitability increased.
Review retirement plan contributions for owners and key staff.
Meet with your tax advisor to go over QBI eligibility (U.S.) or small business deduction (Canada).
Ensure mobile clinic vehicle/mileage logs and home-office usage (if any) are documented.
Review administrative/business banking structure: separate accounts, orderly record-keeping, up-to-date accounting software.
Keep your veterinary practice prepared for tax season
The 2026 tax season offers real opportunities to reduce tax liability—if you plan and act before the end of 2025. Having the right business structure, major equipment purchases, routine business expense tracking, and awareness of product-related sales tax issues will better position your practice for financial and operational success in 2026.
Most of all, remember that getting ahead of 2026 means finalizing all business expenses before December 31, 2025. Keep an eye out for end-of-year promotions from PetDesk so your practice can not only save more money on taxes, but also create a less stressful, more productive clinic environment for excellent patient care.
Note: This content is for informational purposes only and does not constitute legal or tax advice. Please consult a qualified tax professional familiar with veterinary practice operations for advice specific to your clinic and jurisdiction.
1 KPK Law. Veterinary Professional Corporations: The Ins And Outs And Costs Of Incorporation | 2 Accountor CPA (LinkedIn): Tax Deductions Available for Veterinary Practices in Canada
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