Dermatology Practices, CPA & Tax Services

Why Dermatology Practices in Dallas Need a Specialized CPA

Dermatology is one of the few medical specialties where cosmetic procedures, medical treatments, pathology services, and retail product sales all flow through the same practice, and each one carries different tax rules. A general accountant who treats your entire revenue as one bucket is almost certainly costing you money or, worse, creating audit exposure you don’t know about.

At AG Freideman, we work with dermatology practice owners across Dallas, Plano, Frisco, and the surrounding DFW suburbs who need a CPA who understands how their revenue streams interact. Al Freideman has spent 30+ years handling complex, multi-revenue businesses, and dermatology practices are exactly the kind of engagement where that experience pays for itself. Every client works directly with Al, not a junior associate learning on the job.

How Should Cosmetic vs. Medical Revenue Be Treated for Taxes?

The IRS does not tax cosmetic and medical dermatology revenue differently at the income level, but the distinction matters enormously for sales tax, expense allocation, and entity structuring. In Texas, medical services are generally exempt from sales tax, while cosmetic procedures like Botox injections, laser skin resurfacing, and chemical peels can trigger sales tax obligations depending on how the service is structured and whether products are transferred to the patient.

The Texas Comptroller treats the transfer of tangible personal property (such as injectables or topical products applied during a cosmetic procedure) as potentially taxable. If your practice bills a single bundled fee for a cosmetic treatment that includes product, the Comptroller may view the entire charge as taxable unless you can demonstrate that the service component is the “true object” of the transaction. Getting this classification wrong means either overpaying sales tax or underpaying it, and both create problems.

We help Dallas dermatology practices structure their billing and chart of accounts so that cosmetic and medical revenue are clearly separated from day one. This clean separation supports accurate sales tax reporting, simplifies your Texas Franchise Tax filing, and gives you the data you need for strategic decisions like expanding your cosmetic line or bringing on a new associate.

In-House Pathology Lab: Tax Advantages and Pitfalls

Running a pathology lab inside your dermatology practice can be highly profitable, but it creates a second business-within-a-business that needs its own financial tracking. The revenue from lab services (biopsies, Mohs frozen sections, dermatopathology reads) is medical income, but the equipment, reagents, staffing, and space all require careful cost allocation to maximize your deductions.

Section 179 expensing and bonus depreciation under current 2026 IRS rules allow you to deduct qualifying lab equipment in the year of purchase rather than depreciating it over five or seven years. For a dermatology practice investing $80,000 to $250,000 in microscopes, tissue processors, or cryostats, the first-year tax savings can be substantial. However, the equipment must be used more than 50% for business purposes, and the total Section 179 deduction is capped at $1,250,000 for 2026 (subject to IRS inflation adjustments).

We also see practices that fail to properly allocate rent, utilities, and staffing costs between the clinical side and the lab side. If your practice operates as an S-Corp (which most established dermatology practices in Dallas do), incorrect cost allocation can distort your K-1 distributions and create issues with reasonable compensation requirements. Al reviews these allocations line by line to ensure every deductible dollar is captured accurately.

Retail Product Sales and Texas Sales Tax Compliance

If your practice sells skincare products, sunscreens, or cosmeceuticals to patients, you are a retail seller in the eyes of the Texas Comptroller and must collect and remit sales tax. The combined state and local sales tax rate in Dallas is 8.25% (6.25% state plus 2% city), and this applies to every over-the-counter product sold to a patient, whether at a front desk display or through your online store.

Many dermatology practices underestimate the compliance burden here. You need a Texas sales tax permit, you must file returns on the schedule assigned by the Comptroller (monthly, quarterly, or annually, based on your volume), and you must track product revenue separately from service revenue. Practices generating more than $1,000 per month in product sales are typically assigned monthly filing, which means twelve additional compliance deadlines every year.

We handle Texas sales tax filing and compliance for dermatology practices across DFW, making sure your product sales are properly tracked, your returns are filed on time, and you’re collecting the correct rate. Our sales tax services are quoted based on your filing frequency and complexity, so you know exactly what you’re paying.

Structuring Associate Buy-Ins for Tax Efficiency

When a dermatology associate is ready to buy into your practice, the structure of that transaction has major tax consequences for both the selling owner and the incoming partner. The two most common paths (asset purchase vs. equity purchase) produce very different results, and choosing the wrong one can cost either party tens of thousands of dollars.

In an asset purchase, the buyer can depreciate or amortize the purchased assets (equipment, patient records, goodwill), creating future tax deductions. The seller, however, may face ordinary income rates on portions of the sale rather than the more favorable capital gains rate. In an equity purchase (buying membership units in an LLC or shares in an S-Corp), the buyer gets no step-up in asset basis, but the transaction is generally simpler and the seller may qualify for capital gains treatment on the full amount.

For Dallas dermatology practices structured as S-Corps or multi-member LLCs, we model both scenarios with actual numbers before any deal is signed. This includes projecting the tax impact over three to five years, structuring earnout provisions if applicable, and ensuring the buy-in agreement aligns with your operating agreement. Al has guided business owners through these transitions for over three decades, and this is one area where generic tax advice simply doesn’t cut it.

Dermatology Practice Tax Mistakes We Fix

• Failing to separate cosmetic and medical revenue in the books. When everything is lumped together, you can’t accurately assess profitability by service line, and your sales tax exposure becomes a guessing game. We restructure your chart of accounts so each revenue stream is tracked from the first dollar.
• Missing Section 179 deductions on lab and laser equipment. Practices that depreciate qualifying equipment over five to seven years instead of expensing it in year one leave real cash on the table. We identify every eligible asset at purchase and apply the optimal deduction strategy.
• Underpaying or overpaying Texas sales tax on retail products. Some practices collect sales tax on exempt medical supplies, while others skip it entirely on taxable cosmeceuticals. Both create liability. We audit your product catalog and correct the classifications.
• Setting owner compensation too low on S-Corp returns. The IRS scrutinizes S-Corp owners who pay themselves minimal salaries to reduce payroll taxes. For dermatologists, the IRS expects reasonable compensation to reflect specialty physician market rates, which in Dallas typically range from $300,000 to $500,000+ depending on the practice. We set compensation at a defensible level that minimizes audit risk while still optimizing your tax position.
• Ignoring Texas Franchise Tax filing requirements. Every Texas LLC and corporation must file a Franchise Tax Report and Public Information Report annually, even if you owe zero tax. The no-tax-due threshold for 2026 is $2.47 million in total revenue. Missing the May 15 deadline triggers automatic penalties. We handle franchise tax filings for $250 to $500 annually.

What Working with AG Freideman Looks Like

You work directly with Al Freideman, a licensed CPA with 30+ years of experience, not a seasonal preparer or rotating staff member. Al learns your practice, knows your numbers year over year, and is available for questions between filings, not just at tax time. Our 52 five-star Google reviews exist because every client gets this level of personal attention.

We serve dermatology practices across Dallas, Plano, Frisco, Allen, McKinney, Richardson, and the entire DFW metro, with both in-person meetings at our Preston Road office and full virtual capability. Our pricing is transparent: S-Corp and partnership returns run $1,000 to $2,000, monthly bookkeeping with payroll runs $300 to $600 per month, and tax planning sessions start at $197.

Ready to talk about your practice? Call Al directly at (972) 893-3481 or book a free consultation at agfreideman.com/meeting/.