Lowering Your Taxes

How Independent Contractor Physicians can potentially save an additional 20% through a Qualified Business Income Deduction

Being an independent contractor physician (ICP) can be GREAT because as a business owner, it allows multiple ways to lower your taxable income via deductions. For example: 50% of social security & medicare tax, health insurance premiums, purchasing a car, home office expenses (including cellphones and computers), and most importantly, retirement contributions ($55k/year in 2018, $61k/year if 50+. More if you add your spouse as an employee or participate in a defined benefit plan). With the sweeping tax reform of 2018, ICPs can potentially save an additional 20% via the Qualified Business Income (QBI) deduction.

Case Study: ICP Hospitalist

In order for most personal services professionals to utilize the QBI, a married couple has to keep their taxable income under $315k (phased out from $315k-$415k). The rule states that the deduction is equal to or lesser of 20% of the taxpayer’s QBI or 20% of the taxpayer’s net capital gain. By utilizing the QBI, this ICP saved about $10.7k (assuming a 25% effective tax rate).

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This example is from 2019 and is a hypothetical and intended for illustrative purposes only. Neither Generational Financial Partners, NYLIFE Securities LLC and its affiliates, nor its representatives, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.