Physicians who want to know which percentage of their income goes to taxes need to pay attention to their effective tax rate. If you want to decide which tax planning strategy is best for you you want to focus on your marginal tax rate (percentage of taxes you pay on the last dollar you make).
If you're a self-employed physician (1099) you also need to understand:
- Deductible expenses.
- Self-employment tax.
- Self-employment tax deduction.
- Qualified Business Income (QBI) deduction.
- How these deductions work with your standard or itemized deductions.
- Different impact on your cash flow of taxes vs. deductions.
- Entity selection.
If you're income is over the $250,000 threshold (for married people filing jointly), you also want to understand:
- Additional Medicare Tax.
- Net Investment Income Tax.
And you want to make sure your strategies are pulling in the same direction.
If you have any observations and/or questions you can reach me through www.
Marcos
These are hypothetical situations based on real life examples. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.