Taxes are a significant concern for doctors—often the largest single expense we face. With the Tax Cuts and Jobs Act (TCJA) of 2017 set to expire at the end of 2025, it’s crucial for doctors to stay informed and proactive. This post, based on my recent webinar with Paul Channo of Tax Planning Boutique, explores the key changes from the TCJA, potential updates for 2025, and practical strategies for doctors to navigate the evolving tax landscape.

Why Tax Planning Matters More Than Ever

Doctors are no strangers to complex financial landscapes, but taxes often pose a unique challenge. The TCJA brought significant changes, including lower personal tax rates and increased standard deductions, but these benefits are temporary unless extended. Without a strategy, the expiration of these provisions could lead to unexpected tax increases.

To mitigate risks, doctors need proactive, informed tax planning tailored to their unique financial situations.

Key Provisions of the TCJA

The TCJA introduced sweeping changes to the tax code. Here are some highlights that have impacted doctors:

1. Lower Personal Income Tax Rates

Tax brackets were adjusted, with rates reduced across the board. For example, the 15% bracket dropped to 12%, and the 25% bracket was reduced to 22%.

2. Increased Standard Deduction

The standard deduction nearly doubled to $12,000 for single filers and $24,000 for joint filers.

3. Child Tax Credit Expansion

The child tax credit increased from $1,000 to $2,000 per child, with up to $1,400 refundable.

4. Qualified Business Income (QBI) Deduction

This 20% deduction for pass-through entities benefited many private practice doctors, though it phases out for high-income earners in specified service trades like medicine.

What Happens if the TCJA Expires?

If the TCJA sunsets as planned, tax laws will revert to pre-2017 rules, resulting in higher tax rates and reduced deductions. The Congressional Budget Office estimates that 70% of Americans could see higher taxes.

For doctors, this could mean:

• Higher Tax Rates: The 22% bracket could increase back to 25%, and the 24% bracket might rise to 28%.
• Loss of Deductions: The QBI deduction and expanded child tax credit could disappear.
• Increased Itemized Filings: With lower standard deductions, more individuals may need to itemize their returns.

Proposals for 2025: What’s on the Table?

Although there’s uncertainty about the final tax landscape, some proposals are under discussion:

1. Extending the TCJA

Republicans aim to extend or make permanent key provisions, including lower tax rates and the QBI deduction.

2. Adjustments to Depreciation Rules

Bonus depreciation, a favorite for real estate investments, is phasing out but could be revived.

To give you a concrete example of how powerful bonus depreciation can be, let’s look at a cost segregation study I performed with Cost Segregation Authority a couple years ago for our 3rd rental property located in Buffalo, New York. You can see a full 2 year breakdown and analysis of this property here.

But what is important to know now is that the total cost basis of this property was $199,900.

By reclassifying 39% of the 5 year and 15 year assets of the property, I was able to depreciate $84,500 in the first year with 100% bonus depreciation in 2021.

This bonus depreciation resulted in substantial tax savings at a value of $31,000 given my tax brackets in the early years of ownership, significantly improving my cash flow. 

We then used this money to buy another rental property. Rinse and repeat! That’s a big part of why the tortoise beats the hare in real estate investing…

3. Revisiting the SALT Deduction Cap

The $10,000 cap on state and local tax (SALT) deductions has been contentious, especially for high-income earners in states like New York and California.

Tax Strategies Doctors Should Consider

While none of us have a crystal ball or can know for sure what will happen, that doesn’t mean we should start thinking ahead of ways to reduce our tax burden. Here are 4 time tested strategies…

1. Maximize Retirement Contributions

Take full advantage of tax-advantaged retirement accounts, such as 401(k)s or IRAs, to reduce taxable income.

When you contribute to a tax deferred retirement account, the money that you put in is not taxed. And that contribution amount is subtracted from your gross income to lower your taxable income. Plus the money grows tax free. But it is taxed upon withdrawal of course.

However, the tax advantages up front are important. Examples of these types of retirement accounts include:

• 401k/403b
• 457
• HSA
• 529 (Kinda)

Related Post:
A Quick and Dirty Guide to All Types of Investment Accounts: Where Should You Put Your Money?

I say that a 529 is kind of a tax advantaged retirement account because money goes in post-tax, comes out non-taxed, and grows tax free as long as it is used on education costs for a beneficiary. But in many states, there is a tax deduction for contributions. So it can make sense to lower your taxable income this way if you have children and live in such a state. But remember, if you don’t use the withdrawals for education related expenses, then you get hit with a 10% penalty on withdrawal. So that makes it not worth it in that case.

2. Explore Real Estate Opportunities

Real estate investments can offer depreciation benefits, reducing taxable income. Consider opportunities like short-term rentals or becoming a real estate professional. You can find more on the tax benefits of real estate investing here.

3. Evaluate Your Business Structure

For private practice doctors, ensuring the right business entity (e.g., S-Corp or LLC) can maximize tax efficiency.

More on these options here.

4. Stay Informed About Legislative Changes

Monitor developments regarding the TCJA and proposed tax changes. Adjust your tax strategy accordingly.

Planning Ahead: The Role of a Tax Professional

Tax planning is similar to medical diagnosis and treatment: it requires evaluation, a tailored solution, and precise execution. Engaging with a tax professional can help identify missed opportunities, ensure compliance, and optimize savings.

I am obviously a very firm believer that doctors can successfully manage their own investments. There is nothing wring with having a financial advisor that gives you good advice (like ensuing a passive investing strategy) for a fair price. However, you can do it yourself.

In contrast, if you have a tax situation that is more complex than just simple W2 income, a tax advisor and strategist is necessary. Taxes are complicated and ever changing. However, a thoughtful tax saving approach can significantly reduce your greatest expense.

Like the saying goes, we all need to pay the taxes we rightfully owe, but we don’t have to leaver a tip!

Final Thoughts

As the 2025 tax landscape evolves, proactive planning is essential for doctors.

By staying informed, you can navigate these changes confidently and focus on your practice and patients.

If you are looking for someone to review your current tax situation, you can find Paul Channo of Tax Planning Boutique here.

For more on tax planning and strategies for doctors, check out these posts:

• 10 Most Important Year-End Tax Tips for Doctors
• 5 Important Tax Tips for Physicians
• 5 Ways W2 Physicians Can Lower Their Taxes

What do you think? What’s your current tax strategy? Do you plan to change anything in 2025? If so, what? Let me know in the comments below!