It’s a well-known fact that doctors tend to make a good amount of money. (One of the great perks to being a doctor, other than the “saving lives” part.) But compared to other high-earners, you’ve got large amounts of student debt, as well as years spent in school not building equity like your 401(K).
That’s why it can make sense to know how to save money on taxes as a doctor, so you can put it toward establishing your financial standing.
As such, here are five easy ways doctors can save on taxes:
1. Contribute to multiple tax-advantaged retirement accounts. One way to save? Instead of only paying into one company-sponsored 401(k) or 403(b), spread your retirement savings across as many tax-advantaged accounts as you can to get around account maximums. SoFi offers online IRA accounts that can bring you closer to your retirement goals. By stacking accounts like this, you could go from saving just a few thousand max in one account to over a hundred thousand pre-tax across multiple accounts in one year. Yep—that’s a pretty big spread.
2. Consider a 529 Plan account to save for children’s college funds. A 529 Plan account grows tax-free when used for qualifying educational expenses. (Psst—you could even get a tax deduction on your state taxes the year you fund it. Just saying.)
3. If you own a practice or you moonlight, consider deducting all business-related expenses. For doctors, learning and networking comes with a perk: deductions! Think advertising, license fees, exam fees, website fees, professional publications, dues, memberships, medical associations, and conferences. The general strategy is to deduct as much on Schedule C or your personal tax return as possible.
4. For investments, consider the tax benefits of long versus short term gains. Owning an investment for more than one year means any profit will qualify as a long-term gain. That makes sense. What’s important to consider is that long-term capital gains are taxed much lower than short-term capital gains (which are taxed at your ordinary income rate). For those with portfolios to manage, this is one factor worth keeping in mind.
5. For charitable donations, don’t forget you can donate investments. Most people know that donating cash or used items qualifies as a tax deduction. But for physicians, it’s good to remember you can donate appreciated stocks and funds. In this case, you can gain a double tax benefit by getting a tax deduction for the gift—and by sidestepping the capital gain on the sale.
SoFi can’t guarantee future financial performance.
SoFi doesn’t provide tax or legal advice. Individual circumstances are unique. Consult with a qualified tax advisor or attorney.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.