As a surgeon, like other high-income producing professionals, you face unique challenges regarding tax planning. The complexity of your financial situation, especially if you are a self-employed surgeon, requires a strategic approach to managing your tax liabilities to protect what you are working so hard to build.
For example, if you’re a salaried physician doing side activities like teaching or research, you can also claim tax deductions for these activities. Remember, though, you can’t claim expenses related to your salaried job – for those, it’s best to seek reimbursement from your employer.
In this article, we’ll look at 2024 tax planning strategies you can utilize as a self-employed surgeon.
Standard 2024 Tax Deductions for Surgeons
As a self-employed physician, you can deduct all standard business expenses from your tax returns.
Let’s break them down:
- If you’re consulting or treating patients from home, you can write off a portion of your home and certain expenses for maintaining your home office.
- If you have a separate clinic or office space, the rent or lease payments are a significant part of your tax-deductible budget.
- If you employ staff, their wages, taxes, and benefits are major in your business expenses.
- Any medical uniforms or gear, including specialized equipment you use for your practice, should be considered a deduction.
- Don’t overlook the taxes you must pay at the state and local level.
- Think about the everyday items you need in your office – from pens to paper and everything in between.
- The premiums for your malpractice insurance can be deducted.
- You can also deduct the fees for any Board exams, licensing, and renewal fees to keep your professional credentials current.
- You can also deduct any professional memberships and continuing education expenses. This includes travel expenses to medical conferences or seminars, such as airfare, lodging, car rentals, and half of your meal expenses.
- Whether you subscribe to medical journals, magazines, or online subscriptions, these fees can also be deductions.
- If you make house calls to patients, you can deduct some of your transportation expenses.
Qualified Business Income (QBI) Tax Deduction
The Qualified Business Income (QBI) deduction can offer a significant tax benefit for self-employed surgeons. This deduction, introduced in the Tax Cuts and Jobs Act of 2017, allows eligible self-employed professionals, including surgeons, to deduct up to 20% of their qualified business income from their taxable income.
As a self-employed surgeon, you can reduce the taxable income from your medical practice. The QBI deduction applies to income from a sole proprietorship, partnership, S corporation, or other pass-through entities.
To be eligible for the tax break in 2024, your total taxable income needs to be below $191,950 for single filers and $383,900 for those filing jointly. If your income is higher than these thresholds, deductions get trickier. The IRS has detailed rules that decide whether you can get the full benefit of this deduction or just a part of it based on your business income.
There’s also a QBID for rental property income. You can deduct up to 20% of the rental income if you own your practice building or another property.
The QBI deduction does not apply to employee wages. So, if you are employed by a hospital or clinic, you would not qualify for this deduction.
You should consult with a tax planning professional to fully understand how the QBI deduction can benefit your specific tax situation. This strategic planning can lead to substantial tax savings, allowing you to focus more resources on your practice and retirement and less on unnecessary tax burdens.
Utilize Tax-Loss Harvesting
Tax loss harvesting is another way you can reduce your 2024 tax liabilities as a surgeon.
This strategy involves selling investments that are currently suffering an unrealized loss to offset capital gains taxes on other investments where you made a profit. By realizing these losses, you can lower your taxable income, thus reducing your overall tax burden.
Working with your financial advisor for surgeons, you would first identify investments in your portfolio that have declined in value since initially purchased. Then, you would sell these investments to realize the losses.
The key here is the timing of these sales, which should ideally be aligned with the realization of capital gains elsewhere in your portfolio. This alignment ensures that the losses directly offset the gains, reducing your capital gains tax liabilities.
After selling the investments at a loss, you can reinvest the proceeds into similar (but not identical stocks to avoid the wash-sale rule) securities. This step makes sure you realize the tax benefits.
Your wealth management team should provide you with regular updates related to your portfolio as a way to optimize the benefits of tax loss harvesting.
Get to Know Surgeons Capital Management
Your hard work and dedication have brought you success, and you deserve a wealth management firm that’s just as committed to your financial future as you are. Whether you’re still growing your business, thinking about retirement, or selling your practice, we’re here to help you make the right financial decisions.
We specialize in financial advice and services for surgeons, and our top priority is helping you pursue your most important financial goals. Read our five core business principles when it comes to serving your financial interests:
- We focus solely on what’s best for you, with no exceptions.
- We’re not just about numbers; we genuinely care about our clients. We strive to understand everything we need to know about their surgical practices, their business concerns, and the challenges they will face in the future. This commitment is why we attend over 15 annual surgical and professional association meetings. We want to stay connected to our clients.
- We aim to be the go-to financial strategists for successful surgeons, their families, and their practices. We aim to surpass your expectations in service, professionalism, and attention to the details that impact your financial well-being.
- You expect – and deserve – our unwavering integrity, honesty, and respect in all our interactions.
- We believe in a collaborative approach, taking personal responsibility to tackle your most challenging financial concerns.
We’re here to support and guide you through every financial decision, ensuring your hard-earned success is well-managed and continues to grow. Interested in learning more about our wealth management solutions for surgeons? Let’s connect for an introductory call.