Tax-filing tips for independent physicians and practices April 10, 2018
The new tax plan, passed at the end of 2017, does not impact taxes that will be filed this year for 2017 income. Most of the significant changes in the tax plan will take effect with 2018 income. However, there are some timeless tips that independent physicians should note, when filing tax returns for themselves and for their independent practices. Of course, it is always best to consult a professional to ensure the tax filing is legitimate, accurate, and appropriate for each individual physician and practice.
- Making the maximum contribution allowed to an IRA may help reduce the amount of taxable income for an independent physician. The amount of the contribution and qualifications for deducting the contribution vary.
- An independent practice is a small business. There are a number of business deductions that can help offset income. Equipment, travel expense, professional development costs, and other business-related expenses may be deductible.
- The practice, as an established business, may be a pass-through entity if it is a sole proprietorship, partnership, LLC, or S-corp. As a pass-through, the business income is essentially the independent physician’s income.
- Charitable deductions for 2017 can still make a difference for the independent physician. One financial advisor suggests that “most physicians forget that they can also donate securities from their taxable accounts.” This type of donation also enables independent physicians to potentially avoid capital gains taxes.
- Investing in a 529 fund, a college fund for an independent physician’s children, may qualify the physician for a state tax break, depending on the state and other factors.
In 2018, some of the allowable tax deductions will change and the standard deduction on a tax return will increase. Many independent physicians who receive a paycheck from their practice will see more money in that check and, in fact, probably already have early in the year because of tax plan changes.
Planning throughout the year for possible tax deductions and liabilities will help offset the time and stress involved in gathering all the information at the end of each year for the tax preparer. Strategies planned consistently throughout the year may also help the independent physician see a healthier financial picture for the practice.