When entering their chosen field, medical professionals mull over a number of important concerns. They think about their compensation; they ponder the frightening hours they may have to work; they think about the impact they will make on the lives of their patients. Rarely, if ever, do they wonder about the various tax issues which affect the medical field. As it turns out, tax matters should figure more prominently in the minds of medical professionals, because a sound education on the tax issues of the medical field can translate into thousands of dollars in savings. In this article we will cover some of the most substantial tax matters relative to the medical field.
One of the most significant tax issues facing medical professionals is entity selection. Medical professionals have four options to choose from when setting up their medical practice: sole proprietorship, limited liability company (LLC), C corporation and S corporation. Whether one of these entities is the most beneficial selection inevitably depends on the particular facts of a given case. For one professional, an LLC partnership may be the optimal route; and for another an S corporation may be the best choice. It is important that medical professionals make an informed decision when establishing their practice because choosing a suboptimal entity can have severe financial repercussions.
Another noteworthy tax issue is the equipment deduction. The equipment used in the medical field is often very expensive and so the tax code has been designed to lessen the burden imposed by such costs. Professionals who choose to lease their equipment may deduct the full price of the lease on their return. If a doctor leases a high-tech medical device for $500 per month, he may deduct the total cost associated with this lease at the end of the tax year. Equipment which is bought may not be deducted outright but must be depreciated over the course of its useful life. In certain cases, section 179 may be invoked for the purpose of writing off the full value of equipment purchases right away. However, section 179 may not always be viable and so if a person wishes to invoke this section they should consult with a tax professional.
These are just a couple of the tax issues pertinent to the medical field. In addition to these issues, medical professionals should also be aware of the deferral of payroll taxes available to owners, the issue of hiring family members, the home office deduction, the auto deduction and other issues as well. For more information, view the transcript from our webcast on medical professionals here.
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