The recently passed Tax Cuts and Jobs Act is debatable, to say the least. Looking at the situation as a physician, at first glimpse, it seems as though physician independent contractor tax deductions would actually go up. If you make money outside of your “regular” job, you will most likely have some related expenses that are tax deductions.
Persons such as doctors, dentists, veterinarians, lawyers, accountants, contractors, and subcontractors, who operate in an independent trade, business or profession and provide their services to the public, are generally independent contractors and self-employed. Being self-employed creates a number of challenges and opportunities as well. One of these challenges is finding and financing your own business benefits.
Here are a few types of physician tax deductions which in your situation may be applicable.
Start-up Expenses
The costs of commissioning a business are deductible – even if you have not sold any product or have not yet made a profit. The usual starting costs include registration fees for companies, legal fees for start-ups and start-ups, equipment and supply, licenses and permits, and market research.
Education and Training
Taking courses about your job may enable tax deductions for medical professionals. If your employer demands that you take a course or complete a course to retain your job, this is deductible. You can also deduct expenses as you acquire continuing education credits to maintain your medical skills. However, education cannot be deducted if it is part of a study program that qualifies you for a new job or a new company. It is helping you stay competitive in the work you already do. If you have taken any lessons, you may be able to deduct tuition, laboratory fees, copying fees, consumables, textbooks, and registration fees.
Medical educators, leadership courses
BLS / ACLS courses and online courses that help guide your business may be deductibles. Plan Your Taxes Typically, the tax deduction for doctors is half their social security and Medicare taxes. Since independent contract doctors are self-employed, they are responsible for the entire amount. This is an additional 7.65% of income up to a salary of $ 132,900 and 1.45% of income above that limit. Estimate your taxes, including half of Social Security and Medicare taxes, and submit them in a timely manner. Employee Help You may not want to hire an expert.
Hiring individual/virtual contractors
It can be difficult to justify the cost if you know that you can do it all by yourself. However, there are many advantages to having an assistant or assigning certain aspects of your side-event for physician tax deductions for an independent contractor. The cost of hiring virtual assistants, a freelancer, or an employee for your company is likely to be classified as deductible business expenses. Business Travel The business traveling expenses contain transportation, accommodation, tips, and 50% of meals. If you are required to travel for business purposes, such as, to attend an event or conference; your travel expenses may be deducted from your taxes.
Maintaining invoices
You must keep your hotel invoice where you stay, in order to use them as an expense to claim the tax deduction, but you do not have to keep receipts for payments that are less than 75 dollars. Just make certain to keep a record of how much you spent on your business trip. Office Supplies For supplies to be deductible, they must be regular in your profession and essential for your work. If your employer compensates you for the expenses, you cannot deduct them. Even if you only require expert advice seldom, you should bring your own equipment for this job. Do not do any part-time jobs in the office of your “day job”. All supplies and office space that you have for your business or performance can be used to claim deductions.
This may include your answering machine, medical appointment services, medical equipment, office supplies, and even your bag. Marketing and Advertising If the success of your side-event depends on attracting customers, you will probably have to spend money on marketing your business and advertising your services. There is no need to pay taxes on related expenses. This includes
- Cost of developing and operating a website
- Social media advertising campaigns
- Promotional products and sponsorship
- Brochures and business cards
- Market research and product planning
Licenses and Certification
This is a big deal for doctors. The cost of medical licenses and certifications can really add up because of state license fees for first licenses and renewals, especially if you need multiple state licenses or have more than one board certification. You will be charged a fingerprint fee, maintaining the certification and exam fees plus the cost of sending transcripts and proofs.
Memberships, Subscriptions, and Fees
Being a member of an association, society, or other organization involved in your side-event is a great help in networking and making a name for yourself. But it can be expensive. Luckily, contributions and memberships are tax-deductible business expenses. Subscriptions to trade publications, relevant journals, and online communities are also allowed, as long as they are required for your secondary appearances.
Professional Services
Running a business – even if it’s a solo practice – has many moving parts. This is especially true for the heavily regulated healthcare and credentialing services sector. You may eventually need the services of other professionals to give advice or help you with various requirements. In many cases, such as hiring an accountant, lawyer or consultant are deductible benefits.
Insurance
If insurance is required for your work, these are business costs. For those who practice medicine as a side-gig, this means medical insurance for treatment errors. Others may require different types of professional liability insurance, such as error and omission insurance. On average doctors in the solo practice have only one or two issues per year in this category. However, if you run a business that ultimately hires employees, this spend basket becomes considerably larger. As with other occupations, tax deductions for medical professionals must comply with certain guidelines set by the IRS. The deductions you can make depend on whether you are self-employed, an employee, or both, and the costs are necessary to perform your job.
Physician tax deductions
Tax deductions can be reduced by proper tax planning quarterly or half-yearly as experts suggest. Not only does the tax planning help in tax deductions for doctors but for every business owner that is eligible to be taxed. In addition, their taxable income is reduced by phasing out the taxable deductions. Common physician tax deductions include;
Charitable donations
Donations in the form of cash can save taxes. But as a physician, you might not know that you can save taxes by giving their securities as donations. By donating the securities as a gift, physicians can save tax amounts on their taxable accounts and gain a tax benefit.
Pre-tax contributions
Contributions to retirement plans like 457, 403(b), 401(k), or Traditional IRAs are tax-deductible contributions. Many times when physician tax deduction processes, physicians become unable to deduct IRA contributions. For them, experts suggest using the ‘Backdoor Roth IRA contribution’ strategy.
Home mortgage interest
Mortgage interest on homes is typically a common tax deduction for doctors. Most of all, for those with larger mortgages for larger homes. Physicians, if they want, can deduct the interests of $100,000 worth on the homes if it was used for improvement or acquisitions of homes.
Student Loan interest
Due to the high income of physicians, student loan interests are phased out from the deduction. Although to pay these loans, physicians can use cash-out refinance, which converts the interest into a tax deduction.
Final words
To get the tax-saving strategies in place, physicians should hire an accountant that will help them make their medical practice tax reports annually, and plan their tax process quarterly. Knowing the right tools and equipment to engage will determine the benefits of physician tax deductions. Your tax reports should show accounts receivable and expenses during the date and time you specify.