Income Tax Planning for Physicians with Passive Income

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Many physicians specializing in surgery today are diversifying their income through clinical practice compensation, typically a blend of W-2 salary and bonus, with occasionally a moderate amount of K-1 income, and revenues from surgery centers and ancillaries such as med spas, imaging diagnostics, and lab testing. It’s a common complaint among these surgeons that their income tax is excessively high. They are consistently exploring offsets to tax and ways to defer taxes, yet many of these strategies come with significant economic and tax risk. We encounter substantial investments in real estate to generate depreciation deductions, the incorporation of complex retirement plans, which frequently fail to offer net benefits to the physician(s)/owner(s) after costs, and intricate entity planning. However, there could be a more advantageous method—using intangible tax credits combined with depreciation to offset income and income tax liability.

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