Tax Planning

Practical Tax Advice for Everyday Financial Management


By Bill Martin, CFA

Published April 24, 2024

As physicians file their income tax returns, many will have checked the box on standard and well known ways to reduce their tax bill, including maximizing retirement contributions, itemizing deductions, and optimizing health care benefits like HSAs and FSAs.  However, as physicians go about their daily lives, sometimes there are tax exemptions and tips associated with ordinary actions that they may not be aware of. 

We at Earned have compiled a list of 5 tax considerations that physicians may encounter in everyday life.

Giving money away? Whether it’s for a wedding present, help with a down payment, or any other occasion, the gift tax exclusion allows individuals to give up to $18,000 per recipient in 2024 ($36,000 per married couple).  Furthermore, for physicians looking ahead at estate planning, utilizing the gift tax exclusion can reduce the taxable estate and pass wealth to heirs tax-free during your lifetime, without impacting the lifetime estate and gift tax exemption.

Not every gift even counts towards the gift tax exclusion either. The Educational and Medical Exclusion lets you pay for someone's tuition or medical expenses without affecting gift tax limits but only if you pay the institutions directly. For education, only tuition qualifies, not expenses like books or room and board. For medical costs, you can pay providers directly for a wide range of health-related expenses, including insurance premiums, without these payments being counted as taxable gifts.

Charitable contributions? Do you regularly donate money to your favorite charities? In some cases, you may benefit from doubling up contributions in a single tax year with a technique called bunching. This lets you take advantage of the standard deduction in one year and then deduct two years’ worth of contributions in the next.

Renting out your property for less than 15 days? The Augusta Rule (also known to the IRS as Section 280A(g)) allows homeowners to rent out their property for up to 14 days a year without having to report the rental income on their tax return. The 14-day limit is cumulative, not consecutive, allowing a homeowner to rent out their property for a total of 14 days throughout the year without needing to report the income from those days.

Holding cash for 0-5 years? If you live in a high tax state like California or New Jersey, you may want to explore financial instruments that are exempt from state income tax, such as California Municipal Bonds or Treasury Securities.

Attend a medical conference or seminar? Physicians who travel for medical conferences and seminars may be able to deduct their airfare, rental vehicle costs, lodging, and half of their meal costs (using the actual cost or per-diem method). This only applies to 1099 physicians though. If you’re attending as part of your W-2 job be sure to get reimbursed tax-free by your employer.






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