With the heat of August upon us and April still months away, there’s plenty of time to prepare for tax season. For small business owners, careful tax preparation can go a long way toward protecting your bottom line. We know that navigating the waters of tax deductions and deferments can be overwhelming, so we’ve made it our goal to help our small business owner friends by providing tips to help you save. While this post is focused on those who own their own practice, other medical professionals can also benefit!
Retirement Plans and Roth IRAs
The best way to save big for retirement is to start planning as early as possible. And fortunately, there are a number of options for doctors.
1. Tax-deferred Retirement Plan
Every dollar put into a tax-deferred plan will not be taxed this year. For those of you in the highest tax bracket, you may have a marginal tax rate approaching 50%. Under this type of plan, you’d be looking at a savings of $1 for every $2 you put in your retirement account. Not too shabby!
2. SEP-IRA for Contractors
Good news for contractors (paid via 1099s): You can contribute 20% of your annual income to a SEP-IRA up to a maximum of $50,000, with an additional $5500 allotted to individuals over 50. If you make less than $250,000/year, you may contribute even more using a solo 401K instead.
3. 401Ks for Employees
For employees (paid via W-2s), you may be limited up to $17,000/year with a 401K plan. However, many plans offer matching programs, or will at least allow you to self-match up to $50,000 per year. Be sure to discuss details with your employer.
4. Backdoor Roth IRAs
With a Backdoor Roth IRA, you may not see savings immediately (this year), however, it will allow you to protect investments from future taxes. This option allows you to put $5K for yourself and $5K for your spouse into a non-deductible IRA, and then instantly convert them into an IRA. While you are unable to have any other SEP-IRA or traditional IRA accounts at the same time, there are other options available – such as rolling those IRAs into your 401K account.
Call us today at 405-801-2146 to discuss best options for you and your family.
Health insurance can cost a pretty penny, but fortunately, you can pay for it with pre-tax dollars. Health insurance premiums are deductible as a business expense, as are contributions to health savings accounts that you can use toward co-pays. For individuals and families in good health, a high-deductible health plan with an HSA may be a perfect, money-saving option.
Deductions – Owner vs. Employee
If you’re a practice owner or a partner (K-1 form), or if you’re an independent contractor (1099 form), you have a great deal of flexibility when it comes to using business expenses for reducing your taxable income. On the other hand, if you are an employee who receives income as wages (W-2 form), you may encounter hurdles that reduce or eliminate your deduction entitlements. But don’t despair – there are still creative options available for your business expense deductions.
Business Expense Write-Offs
One of the best ways to save money on your taxes is to track business expenses for easy write-offs. Below is a quick “cheat sheet” for some of the easiest deductions for doctors:
- Health insurance premiums for practice owners and staff
- Mobile phones for self and employees
- Licensing and professional dues
- Malpractice insurance
- Continuing medical education
- Patient refunds
- Scrubs, white coats, and laundering costs
- Office and medical supplies
- Computers, software, and ancillary equipment
Phew! If this all seems like a lot, please remember that we are here to help. Go ahead and browse our services page and fill out the form for a free consultation. Or give us a call at 844-841-9857!