If you’re a medical professional, you know how hard it is to manage your finances. It includes everything from commute expenses to family planning or savings. In the meantime navigating convoluted tax and attempting to stay on top of recent tax law changes can be mind-numbing. It makes you think you’re not making the most of your pediatrician salary and losing much.
However, to overcome the tax loophole, we’ve developed the top 3 tax strategies to help you put your best foot forward in finances and make the most of your income. These practices will help you to handle the complexity of tax planning, preparation, and compliance as a medical practitioner. Let’s dive into how to keep your hard-earned money safe.
As a medical professional, it’s crucial to have a solid understanding of tax strategies to ensure that you’re maximizing your earnings and minimizing your tax burden for your medical practice.
1- Make a Retirement Strategy
Contributing to a retirement plan is the most straightforward way to reduce taxes. Pre-tax retirement plans allow you to reduce your taxable income by the amount you contribute. As a result of the retirement contribution lowering your taxable income, you pay less in taxes. However, it’s crucial to remember that there are restrictions on the amount you can put toward your retirement, depending on your retirement plan and whether you’re an employer or an employee.
Moreover, putting money into a retirement plan can help manage tax planning and save money in the long run since you can withdraw it at a lower rate in retirement. Your retirement funds are tax-deferred, which means that while you don’t pay taxes when you make contributions, they will grow tax-free. You’ll owe taxes when you cash it out, regardless of why you’re doing it.
2- Employ Family
The next step in your tax planning is to make the most of your family. You can start employing your family members to lower your taxable income. By bringing in family members, you can transfer earnings from your higher tax bracket to their lower one and set up a business deduction for their pay.
You can use this to educate your kids about financial management or start a retirement or college fund. Or, if you routinely provide help for your parents, you can hire them as employees and deduct the cost of that support from your income.
Although it is a simple tax technique, you must adhere to a few guidelines. Every family member you recruit must be paid a fair wage and have a real job in your practice. Key steps include opening a separate bank account in their name and documenting their employment responsibilities and duties.
3- Make Your Taxable Income Lower
You can keep more of what you earn and pay fewer taxes if you lower your taxable income. But that does not imply that you should work less or make less money. To reduce your taxable income, reorganize your contributions and income.
Donating stocks from investment accounts to charities is one strategy to lower your taxable income. Donating securities instead of money provides a double tax deduction. In addition to receiving a single deductible for the gift, you’ll also avoid paying capital gains taxes when you sell the stocks.
Handling your finances as a medical professional can be difficult, especially for taxes. Yet, putting the top three tax methods discussed above into practice will help you maximize your earnings and protect your hard-earned money.
Minimize your taxable income, develop a retirement plan, and hire family members. As a result, you can save more money in the future. And get professional tax advice to maximize your tax savings while maintaining compliance with all relevant laws and regulations.
Naomi started studying food science at college but never finished the course. She later got into personal finance. She grew up in a middle-class neighborhood. She was raised by her father, her mother having left when she was young. Naomi has 2 children with her husband Thomas: Shelby aged 2, and Karen aged 6. Naomi also has a dog named Bull Market. Naomi’s best friend is a financial consultant called Emily Walker. They are inseparable. She also hangs around with Mollie Carpenter and Lennon Brewer. They enjoy painting together.