2019 is about to come to a close and it's about time to start thinking about tax preparation. With all of the recent tax changes, it might be an ideal time to think about how to maximize your tax refund. Physicians, in particular, as high paid earners, will want to be aware of the best ways to lower adjusted gross income, find tax credits and defer income from taxation.
Five Ways To Increase Your Tax Refund
With a busy practice, hospital rounds, and working well over 60-70 hours a week, most health professionals do not have the time or patience to deal with tax issues. As a result, many people overpay on their taxes. Five ways high-earning physicians maximize your tax refund are:
- Self-employment - There are many allowable deductions when you are self-employed. This lowers your tax bracket. However, keep in mind that there are some disadvantages to being self-employed as well. Discuss the pros and cons with a tax professional before making any changes.
- Tax deferment strategies - Traditional tax savings plans through an employer such as 401(k), 401(a), 403(b), or a 457(b), can be used to defer taxes. Self-employed individuals may defer taxes by making contributions into plans such as a SIMPLE IRA, defined benefit plan, or SEP-IRA.
- Health Savings Account - For those with a high deductible health insurance plan, an HSA is a good way to defer the tax on funds deposited. There are some restrictions on how much you can deposit and the funds must be used by the end of the year they are deposited or you will lose them.
- Family deductions - While the personal exemptions have been eliminated, the child tax credit has been increased from $1,000 to $2,000. As this is a credit rather than a deduction, it actually reduces tax liability. This credit is only available for a child under the age of 17.
- Donations - Although the standard deduction has been raised considerably, physicians with higher earnings may benefit from giving to charities. If you are close to being able to claim the standard deduction ($24,000 for married filing jointly and $12,000 for single) in such categories as mortgage interest, real estate taxes, medical expenses that exceed 10% of your adjusted gross income as well as a few other items, charitable giving can put you over the amount needed. Additionally, if you donate stocks, property, mutual funds or other assets, you will not be required to pay any capital gains on the investment.