Running a medical practice means high income. This, in turn, implies more significant tax payments. Being a physician, you can opt for apt tax planning for physicians and reduce taxes. However, there is a myth associated with tax planning as well. Only super-rich people can afford to use tax planning strategies. Read the post to know how effective tax planning strategies can reap the benefits of tax saving.
Without further delay, let’s get started!
Taxes Imposed On Physicians In New York
If, particularly, New York is considered, the physicians are subjected to the same taxes as other individuals or businesses. It comprises income tax, which is applied to the physician’s earnings. The higher the income, the higher the tax rate.
In addition to income tax, other taxes imposed on a physician are self-employment taxes. But, the tax applies to self-employed physicians only. Social security and medicare taxes are part of self-employment taxes.
Furthermore, an additional tax, called Millionaires Tax, is applicable for people who earn over 1 million dollars. In case you fall into this category, you must also pay millionaire tax.
How is Tax Planning Significant For Physicians?
Let’s discuss the significance of tax planning for physicians in detail. It is a well-known fact that tax planning will minimize the tax liability for physicians. If you understand the tax rules and regulations, you can better structure the income and expenses in a way that will help you to reduce the amount of taxes.
Do you know, as a physician, you can take advantage of deductions and credits for business expenses? Considering setting up a retirement plan, you are already saving money.
In short, tax planning is for you if you want to keep more of your hard-earned income. You can save it for the future, invest in your business and enjoy the benefits.
Tax Strategies For Physicians
There are some strategies a physician can look at for a better future. Obviously, if a person earns more, they have to contribute to taxes in the same proportion. But, if you implement some strategies, you can save money on taxes too. If you implement the following tax strategies, you can minimize your tax liability. Here is the list:
- Maximize Deductions- A physician can deduct expenses related to continuing education or licensing fees. Also, a physician can take advantage of deductions for business expenses such as office rent or equipment.
- Retirement Planning-Why contribute your hard-earned income for tax contributions? Instead, you can take a 401(k) plan or SEP-IRA. The contributions to these plans are tax-deductible. The amazing fact is that these contributions are tax-free until they are withdrawn.
- Health Savings Accounts-You can opt for a Health Savings Account. It is a tax-advantaged savings account. You can use such accounts to pay for qualifying medical expenses. The contributions to an HSA are tax-deductible.
- Incorporation- If you use a pass-through entity such as an LLC or an S-corp, you can pay taxes for businesses at a lower rate than to pay at an individual level.
- Tax Credit- A physician can take advantage of tax credits such as the Health Care Tax Credit. But, this type of credit is available to small employers who hire employees for the smaller business.
- Student Loan Payment Deduction-Medical degrees are comparatively more expensive than other study courses. This is the reason physicians carry heavy student loans for a long time. You can use a strategic plan that will help you to pay off the loan and save money for taxes at the same time.
- Create A Long-Term Plan-Do not aim to save money for the current year. Rather, plan for the long term. You can save money on taxes if you have a long-term strategic plan. But, the main thing is to keep track of income. In this way, you can better manage your income.
Mistakes To Avoid During Tax Planning For Physicians
Medical professionals are experts in their professions for sure. But, even this is true that nobody is perfect. Hence, it is acceptable by the medical experts to commit mistakes especially if they have to work their accounts. So, after the discussion of tax-strategies, now is the right time to discuss mistakes a physician must avoid. If you are a physician, do not skip the following segment. Here is the list:
Failing To Properly Classify Employees
Sometimes, physicians need to remember to classify themselves in the right category. This misclassification can result in significant penalties and fines.
Not Planning For The Self-Employment Tax
Self-employed physicians usually shoulder the full amount of the self-employment tax. This expense could be significant.
Neglecting To Track And Deduct Business Expenses
A physician can deduct a wide range of expenses. You can deduct expenses from office rent, equipment, and supplies. But keep accurate records.
Not Adopting Retirement Savings Options
Some physicians do not opt for retirement savings options like 401 (k) and SEPs. But if invested in these options, you can reduce your tax burden and save income effectively.
Not Considering The Tax Implications Of A Business Structure Change
Changes in the structure of practice can have significant tax implications. But, consider the business structure in mind carefully while transiting it.
Not Keeping Accurate Records Of Income And Expenses
It is better to keep an accurate record of income and expenses. Inaccurate record keeping can lead to errors on tax–returns.
Not Taking Advantage Of Tax Credits And Deductions
Physicians should take advantage of the tax credits and deductions available to them. Like-small business health care credit.
Overall, it can be concluded that one should avoid making such mistakes. But, it is always best to consult with a tax professional who will help you understand the picture better. Moreover, every individual case is different.
Healthcare Consulting Firm
After the discussion related to strategies and mistakes, now is the right time to discuss the significance of a healthcare consulting firm. For the people, who need more awareness about healthcare consulting firms, this segment is for them.
A healthcare consulting firm is a company that offers expert advice to healthcare organizations and businesses. They have consultants with specialized knowledge and experience in finance, healthcare policies and operations. They work with hospitals, clinics, insurance companies and government agencies to help them improve their efficiency. One such popular healthcare consulting firm is MDcpas. Let’s read about it in detail.
MDcpas
MDcpas is a healthcare consulting firm. Our consultants have a diverse composition of firm experience. Along with tax planning for physicians, we provide a wide range of services. These are:
- Estate planning
- Retirement planning
- Quickbooks Consulting
- Equipment and technology investments
- Accounting and tax
- Real estate investments
- Assurance services
- Corporate responsibility
You can better check online reviews. The firm is not famous for trade. Rather, our experience in the field makes us unique from others. In case of any difficult tax situation, you can contact us. We are always available for our clients. Our firm has three specialities: medicine, dentistry and physical therapy.
Final Thoughts
Conclusively, physicians assist people in leading their life back better. Isn’t it amazing to help them? Healthcare consulting firms conduct the same task. If you are seeking help with tax planning for dentists, contact MDcpas.
For more information, visit our website.
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