Tax Planning for Physicians in California (2026)

Physicians in California face a top rate of 13.3% on top of the 37% federal bracket and payroll taxes. This guide summarizes the 2026 California rules that matter most to doctors, dentists and practice owners.

California income tax rates for 2026

California's top 2026 rate is 13.3%. Brackets apply to state taxable income.

Pass-through entity tax (SALT workaround)

Yes. The state has an elective pass-through entity tax (PTET) that partnerships and S corporations can use to deduct state income tax at the entity level.

For physician practice owners, the PTET matters more in 2026 because the federal SALT deduction for individuals phases back down toward $10,000 once modified AGI passes $505,000. Read our guide to the pass-through entity tax for physicians.

Local income taxes

California has no city income tax, but wages above the federal Social Security base remain subject to State Disability Insurance (SDI) with no wage cap, and some cities (for example San Francisco and Los Angeles) impose business taxes on practices.

Planning notes for California physicians

• California's top rate is 13.3% on income over $1 million (including the 1% Mental Health Services surcharge), and SDI applies to every dollar of wages, so a high-earning W-2 physician's marginal state cost can exceed 14%.
• California does not conform to federal bonus depreciation or many federal retirement and HSA rules (HSA contributions are taxable for California), so a strategy that saves federal tax may save little at the state level.
• Physicians generally cannot practice through an LLC in California; medical practices use a professional medical corporation, which can then elect S corporation status (California charges a 1.5% franchise tax on S corporation income).
• California's elective pass-through entity tax has been extended through tax years beginning before January 1, 2031, which makes it one of the most valuable SALT workarounds for practice owners.

Federal strategies that apply in every state

State tax is only part of the picture. The federal rules drive most of the savings for physicians in California:

• W-2 physician tax strategies: maximize 401(k)/403(b), 457(b), HSA and the backdoor Roth.
• 1099 physician tax planning: solo 401(k), deductions and the S corporation decision.
• Practice owners: entity, compensation, cash balance plans and exit planning.
• Real estate and cost segregation for physicians with time to participate.

City guides for California physicians

Local taxes and planning notes for physicians in Long Beach, Los Angeles, San Francisco, San Diego, Sacramento, San Jose, Orange County. Our planning is delivered virtually, so location does not limit access.

Guides by specialty

Surgeons · Anesthesiologists · Radiologists · Orthopedic Surgeons · Cardiologists · Dentists · Dermatologists · Emergency Physicians · Gastroenterologists · Ophthalmologists · Neurosurgeons · Plastic Surgeons · Psychiatrists · Hospitalists · Pain Management Physicians

This article is for general educational purposes and is not tax, legal or investment advice. Tax law changes often and its application depends on your facts. Figures reflect 2026 rules as published by the sources listed above. Consult a qualified professional before acting. See our editorial policy.