Let’s face it, doc, you’re a superhero. With your life-saving skills, you battle the flu, mend broken bones, and practically bring the dead back to life. But when it comes to your taxes, it seems like you need the savings. Your heroic cape quickly transforms into a heavy anxiety poncho, leaving you feeling blindfolded and helpless. Really, tax season for you is like battling consistent diarrhea. How can you put an end to this sickening relationship with your taxes? Pick up your scalpel, and let’s dissect 2024 tax planning for doctors.
Do Doctors Have To Pay Income Tax?
You’re doing a great job of saving people’s lives, so why should you have to pay taxes again? Sorry to burst the bubble, but Uncle Sam expects you to pay taxes like any other working individual. According to the IRS, all earned income, including that earned from your medical practice, is subject to taxes.
2024 Tax Planning For Doctors
According to the 2021 Medscape Physician Compensation Report, the average annual income for physicians in the United States ranges from $243,000 to $648,000 based on their specialty. As a doctor, you likely earn a high income, and this can bring unusually high tax responsibilities, which is why you need to come up with tax strategies that can help you secure your financial future and create sustainable wealth over time.
Here are some significant 2024 tax planning for doctors that save you a lot of tax money.
Home Office Deductions
If you operate some aspect of your medical practice from your residence, then the home office deduction is a great leverage to take advantage of. This deduction allows you to cut down your overall tax bill for 2024 tax planning for doctors. With this deduction, you can offset a portion of your rent, mortgage, or associated utilities and maintenance costs.
However, the home office must be used exclusively for some aspect of your practice, such as meeting and treating patients and handling administrative tasks.
When using home office deduction, be sure to maintain meticulous records of expenses related to your home office.
Medical Equipment And Supplies
Doctors invest a large amount of funds in specialized equipment and essential medical supplies to provide high-quality care to their patients; the IRS allows doctors to deduct the total cost of medical supplies and equipment in the year they are purchased, resulting in substantial tax savings. You can claim a wide range of medical supplies as tax deductions, such as personal protective equipment, medical instruments, medical consumables, medical office furniture, and cleaning and sterilization supplies.
Professional Association Membership
Did you know you can deduct membership fees to professional medical associations from your taxes? Association memberships show commitment to your professional development, which bolsters your reputation as a doctor within the medical association. However, qualifying for this deduction is highly dependent on the relation to your field of practice.
Employ Your Family Members
If you have a family member interested in contributing to your medical practice, then you’ve just got a tax-saving opportunity. Employing your family members allows you to shift your income, which potentially reduces your overall tax bill. You’re not only going to be enjoying tax benefits, but your family members will also be enjoying health insurance coverage, retirement plan contributions, and other employee perks you can deduct as business expenses. Just be sure that any family member you employ in your practices plays legitimate roles and responsibilities that justify their compensation.
Charitable Donations
Charitable donations are not just about giving; they are about making tax-wise decisions. If you’re making charitable donations, consider making your donation in a bunch once a year rather than spreading them out. This way, you can take advantage of higher charitable tax deduction limits available in one year, thereby getting a larger deduction and a lower tax bill.
Take Advantage Of Retirement Plans
Want a smart retirement plan? Start contributing to retirement plans such as 401(k)s, 403 (b)s. A retirement plan not only provides a steady stream of income when you retire, but it also helps you save significantly on your taxes. These retirement contributions are pre-taxed, which allows them to grow tax-free until you start taking contributions when you retire.
Create Passive Income
While making the maximum contribution to your retirement account and enjoying tax-deferred growth may be a great option, it might not be the best use of your money. You should also consider putting your money into other investments, such as buying real estate, to create passive income. For example, you might want to invest in buying a stock in a corporation that provides long-term value rather than seeking an immediate tax deduction.
Take Home
Medical doctor or not, we are all human. Apart from saving lives, you also have financial goals to achieve, which is why every dollar you can save from your taxes counts. Exploring your eligible tax loopholes and backing them up with a solid tax plan helps you upscale your financial position and ensure you’re financially secure while saving lives. Ready to take proactive steps to optimize your finances? Book a free consultation with the Tax Goddess team, and we’ll be happy to help you!
