As a physician who manages your own private practice, you are well aware of the intricate and intimidating nature of taxes. From payroll to franchise to quarterly returns, it’s hard to escape thinking about the next tax bill due. When it comes to your practice, though, it’s smart to know that several tax deductions exist if you plan for ways to reduce your taxable income. Here are a few tips, though they can never replace employing a Certified Public Accountant.
Common tax deductions for physicians
While there are all sorts of interesting and, sometimes, creative tax deductions you can take, there are also very standard and straight-forward ways to minimize your private practice’s taxable income. These are the most common things that CPAs will consider. Home office deduction: If you use a portion of your home for your medical practice, you may be able to deduct a portion of your mortgage interest, property taxes, and utilities. There are many people who refuse to take this deduction because they believe this is the quickest and best way to trigger and audit from the IRS. However, there are plenty of articles that dispel the myth. Medical equipment: The cost of medical equipment that you use in your practice is deductible. This includes items such as stethoscopes, microscopes, and surgical instruments. Malpractice insurance premiums: The premiums you pay for malpractice insurance are deductible. Continuing education expenses: The cost of continuing education courses that you take to maintain your medical license is deductible. Travel expenses: If you travel for business purposes, you may be able to deduct your travel expenses, including airfare, lodging, and meals. Business meals: You can deduct 50% of the cost of business meals that are directly related to your medical practice. Subscriptions: The cost of subscriptions to medical journals and other professional publications is deductible. Office supplies: The cost of office supplies, such as pens, paper, and computer paper, is deductible. Professional dues: The cost of dues to professional organizations is deductible. State and local taxes: You can deduct state and local taxes that you pay on your business income. These are just a few of the many tax deductions that are available to physicians who run their own private practice. It is important to consult with a tax professional to determine which deductions you are eligible for.
Other tips for more tax deductions
In addition to the above deductions, there are a few other things that physicians can do to reduce their taxable income: Contribute to a retirement plan: Contribute to a retirement plan, such as a 401(k) or SEP IRA, to save for retirement on a tax-deferred basis. Take advantage of the qualified business income (QBI) deduction: The QBI deduction is a tax deduction that is available to small businesses. Physicians who meet certain requirements may be able to deduct up to 20% of their QBI from their taxable income. Claim the standard deduction or itemize your deductions: Whether you claim the standard deduction or itemize your deductions will depend on your individual circumstances. However, physicians who have a lot of deductible expenses may be able to save money by itemizing their deductions. This is one of the most important places where a CPA can help you make the best decision for your practice By taking advantage of the tax deductions that are available to them, physicians can reduce their taxable income and save money on taxes.
Good records help claim tax deductions
Here are some additional tips for physicians who are looking to maximize their tax deductions:
- Keep good records of all of your business expenses. This will make it easier to claim the deductions that you are eligible for.
- Categorize your expenses carefully. This will help you to track your deductions and ensure that you are claiming the correct amount.
- Be aware of the limitations on certain deductions. For example, there is a limit on the amount of medical expenses that you can deduct.
- Consult with a tax professional. This is the most important one. A tax professional can help you understand the tax deductions that are available to you and ensure that you are claiming them correctly.
