Doctor’s Tax Planning is a way to identify your practice’s financial strategies and tax deductions. Generally, doctors do not like the idea of thinking like a business owner or an entrepreneur even when their practice is classified as a business. However, many doctors these days have given it a thought to think and act like an entrepreneur and not just like a well-qualified doctor. More often than not, we see highly talented doctors who do not have any idea about how their business or finance works. It is more common to notice them during the dreaded “Tax time”.
This article is dedicated to those talented doctors and medical professionals who also own independent practice. Accounting firms in Maryland advise doctors to understand their finances better to gain a better idea about the health of their business. If doctors have any issue with their finances, they can take the help of an agency providing accounting services for doctors. We are going to mention the list of things below that doctors must know about the practice’s finances.
Before we head to business finance, first let us understand the importance of personal finance for a medical professional.
- Firstly, spend less than your income. As your income increases, do not try to improve your lifestyle significantly as it may be difficult to manage when times are tough.
- Secondly, save a particular percentage every month and invest.
- Lastly, keep doing this for a very long time to gain financial independence.
If you need help regarding your personal finance, you can contact a tax accountant in Columbia MD.
Doctor’s Tax Planning
Tax time can be a stressful time for doctors. We understand that they have worked extremely hard for their money and are looking to save as much money as possible during this time. Moderate tax saving is necessary but finding ways to pay less tax makes medical professionals easy victims to tax shelter investments. As a medical practice owner, you must take care that you do not fall for these risky schemes to get tax credits and deductions. If you are thinking about tax credits and deductions, talk to a CPA in Maryland or CPA in Columbia.
Legitimate Tax Deductions
To alleviate the stress of most medical business owners, let us try to understand the fundamentals of legitimate tax deductions. To take advantage of these deductions, you must employ yourself as a physician at your own practice. Some doctors do not understand the importance of this step as they think they are business owners or partners at the medical practice. Similarly, check these tax deductions if you are a contractor. These small things can ultimately end up in thousands of dollars that you might have saved. Hence, if you are not keeping a record then start doing it now as it will help you with your tax preparation in Maryland or tax preparation in Columbia MD.
List of Deductibles
Keep a note of all licensing and professional fees like DEA licenses, CME expenses or examination fees, etc.
- Compile all your bills for phone/internet and pager usage.
- Secondly, you can deduct home office expenses even though you do not have a home office.
- Collect bills related to medical gear like coats, gloves, and work shoes.
- Collect all work-related expenses including travel, meals, and accommodation, etc.
Lastly, you can also count your work-related car expenses excluding daily commuting.
Now let us take a look at some of the major expenses that you may consider for tax purposes. Firstly, one of the major expenses is related to office equipment and stationery. Moreover, you can plan to buy certain medical equipment in a way where you can maximize your tax deductions. Similarly, you must also plan to deduct malpractice insurance and refunds, etc.
Payroll taxes can be overwhelming, tiring, and confusing to an extent. As a self-employed doctor, you must pay your taxes as an employer and an employee too. But, there are ways to deduct the employer portion of employment taxes.
Are you a W-2 employee?
Are you self-employed at your medical practice or work as a W-2 employee for tax purposes? The tax bracket for a self-employed person is quite different from a W-2 employee. When you have a side business apart from your medical profession, you can significantly lower your taxable income through tax deductions in your alternate business.
It is quite evident from the above points that we have not covered the more complex type of tax deductions you can utilize as a medical business owner to reduce your tax bill. However, we hope that by following the above steps too you can lower your tax bill considerably and maximize your hard-earned profits. For more complex deductions, you will need to consult a cpa for doctors or a CPA in Maryland.