You might be paying far more in taxes than you need or are even supposed to. If you’re not reporting all your tax-deductible expenses on your tax return, you’re likely leaving money on the table. This is especially true in the medical field when there are so many overhead costs that should be deducted from your taxable income.
If you’re a self-employed physician or another medical professional, there are countless business-related tax deductions available for you to claim. If you’re an employee of a hospital or a smaller practice, there are still some high costs you should be reporting, but there aren’t quite as many.
Top Tax Deductions for Doctors
Here are a few of the biggest deductions available for doctors:
The money you save for retirement with an IRA or a 401(k) is money you can deduct from your income and avoid higher taxes this year. The IRS sets IRA contribution limits each year, and you should aim to put away the maximum amount possible if you can afford it.
Instead of deferring taxes with an IRA investment, you can pay the taxes upfront with a Roth IRA but use this to manage your tax burden in the future.
Self-employed physicians receive a virtually unlimited tax deduction for business-driven expenses like office equipment, computers and mobile phones, office supplies, and more. Internet and phone line costs can be deducted, and so can the costs of whatever computer programs you use to do your work or record patient data.
Many costs go into running a business every day, so you should track and report all of those costs and ensure you claim every eligible expense. An accountant can help you be sure about what is deductible and what isn’t.
As a medical professional, you can’t practice medicine at all unless you’ve paid all the necessary licensing fees and organizational dues. Most of all of these expenses will be tax-deductible as well.
This deduction includes board exam fees, medical license renewals, membership dues, and even continuing education costs. Your ongoing work as a physician depends on staying informed and up-to-date on all the latest developments in your field. Therefore, any expense associated with professional development or education should be deductible.
That applies to all educational costs, whether you were required to spend it or not. You can also deduct subscription costs related to any professional or technical publications.
Health Care Premiums
If you’re self-employed and pay for your own health insurance, you can deduct your health care premiums as a business expense. That’s something your employer would likely pay for if you were self-employed, so it should be deducted from your personal income for tax purposes.
You can also deduct contributions you make to an HSA from your taxable income. If you have an HSA, try to save the maximum amount possible so that you can protect that contribution from being taxed.
Do you rent an office or building solely for work use? If you do, then all of the building management and upkeep costs may be deductible. Keep track of your rent, utilities, and other office costs so that you can report them on your tax return.
All overnight travel for business purposes can be claimed as a business expense. If you go out of town to attend a conference or seminar, then you can record all of your costs to deduct from your taxable income later. This includes lodging, airfare, and more.
If you drive your own vehicle for work purposes, whether you’re going out of town or not, you can report the business mileage on your return. You can deduct those miles from your income according to the IRS standard mileage rates for the year.
Don’t forget to consider your own home mortgage costs when preparing your tax return. You can still claim home mortgage interest as a tax deduction as well, and that can make a big difference.
The precise maximum amount deductible depends on when you signed your mortgage, but whenever you signed, you should be able to deduct most or all of the interest you’ve paid on your home mortgage this year.
A doctor’s office requires much more expensive equipment and regular supplies than your average office. You have to spend money all the time on fresh medical supplies and medical technology.
You should be able to claim all of the money spent on equipment and supplies as a tax deduction. If the professional medical equipment is important for the work you do and the care you provide, it should be a deductible business expense.
If you have any employees working for you, their salaries and wages may be tax-deductible expenses as well. Even if it’s just an assistant or a receptionist, you may have significant business expenses through the year related to their wages or other costs related to their employment.
Charitable contribution deductions can make a huge impact on your tax return. You can deduct qualifying contributions up to your total adjusted gross income for the year.
This is a great opportunity to reduce your tax burden, and it’s effectively a chance for you to decide for yourself where your tax dollars go. Instead of paying into the general government treasury, you can channel your money directly to most of the causes you care about.
Get Advice From a Professional
Tax law is complicated, and the rules for deductions sometimes change every year. To really be sure you’re following the rules and maximizing your deductions, you’ll need to work with an accountant.
Work with a tax professional you trust to go through your finances and find every available deduction. A professional with tax experience will know how to maximize your after-tax income, properly report expenses, and keep your risk of an audit as low as possible.
Preparing and filing your tax return doesn’t have to be an ordeal. However, you must keep track of business expenses and other possible deductions throughout the year. Effective bookkeeping early on will make everything easier later. Learn the best practices now so that you can keep your finances as healthy as your satisfied patients.