Generic “tax tips for high earners” articles often miss the realities of physician finances. You don’t need another reminder that taxes are due in April or a basic explanation of what a marginal tax bracket is. What’s more valuable are practical, physician-specific strategies that reflect the complexities of medical income, practice structures, and long-term wealth planning.
Below, you’ll find a guide to high-impact tax write-offs specifically for doctors, organized by career stage and income type. Whether you are a W-2 attending, picking up a few locum shifts, or running a private practice, structural habits and specific strategies can help you keep more of what you earn.
It is well recommended that a tax or financial industry professional can give you individualized advice, as one physician on Sermo can attest: “I use a Financial Advisor to make investments and also follow recommendations from my CPA in regards to a tax action plan,” they write. “I have done well by them.” That said, it is still beneficial to familiarize yourself with the tax nuances that tend to be most impactful for physicians.
Disclaimer: This article is for informational purposes only and does not constitute tax or legal advice. Consult a qualified CPA or tax advisor for advice regarding your specific situation.
What makes physician taxes unique?
The physician career journey, income mix and tax picture is unique: you typically experience sudden, large jumps in income post-residency and by year four of practice often hold a complex mix of W-2, 1099 and K-1 income streams—such as moonlighting, locum tenens, expert witness consulting, or K-1 partnership income— that generalist accountants may not optimize for. Instead of proactive planning, some doctors file reactively and miss out on specialty-specific deductions that could be benefitting you.
“Make sure you take advantage of all possible deductions,” one general practitioner member recommends. “Expenses such as medical supplies, insurance, and continuing education may be deductible.”
Tax strategy is top-of-mind for many physicians at a time that many feel they aren’t fairly compensated in their take-home pay. A previous Sermo poll established that 64% of physicians were dissatisfied with their compensation at work.. “Of course we are supposed to be altruistic and not care if we don’t get paid but when the bills for overhead are due the utility companies and landlord couldn’t care less,” an internist writes on Sermo.
Tax strategy is a recurring topic in peer discussions (especially among newly-minted attendings) on Sermo, further suggesting that the topic matters to physicians.
Tax deduction tips every working physician should know
While some tips are specific to certain income types, these are foundational tax-advantaged accounts that every working physician can leverage to save money.
Maximizing contributions to tax-advantaged retirement accounts
“Early and consistent saving, particularly in tax-advantaged retirement accounts like 401(k) or IRA, is recommended,” notes an anesthesiologist on Sermo. This was the most popular tax-saving strategy among polled Sermo members, with 18% indicating that they use the approach.
Employer-sponsored plans such as 401(k)s and 403(b)s allow contributions to grow tax-deferred, meaning you won’t pay taxes on investment gains until retirement withdrawals begin. Many hospital systems and large employers also offer matching contributions, which can significantly boost long-term savings.
As for those who don’t have an employer, “doctors should consider setting up a SEP IRA or Solo 401(k) if self-employed—these plans allow for significant tax-deferred retirement contributions, reducing taxable income while building long-term savings,” recommends a radiation oncologist on Sermo.
Utilizing a Backdoor Roth IRA for tax-free retirement growth
Since most attending physicians earn too much to contribute directly to a Roth IRA, the backdoor Roth strategy allows them to contribute post-tax money to a traditional IRA and then convert those funds into a Roth IRA. While the contribution itself is not tax-deductible, future investment growth and qualified withdrawals in retirement are tax-free. Just be aware of the IRS pro-rata rule, which can create unexpected tax consequences if you already hold pre-tax IRA balances.
Contributing to an HSA for tax-free medical expenses
If you have a high-deductible health plan, the health savings account (HSA) is a triple-tax-advantaged account. In other words, your contributions go in pre-tax, grow tax-free, and come out tax-free (with the caveat that you must use them on medical expenses). “Reduce taxes by investing in muni bonds, HSAs, 529 plans for children etc. to increase tax exempt income,” suggests an internist on Sermo.
Investing in real estate for depreciation and tax deductions
Real estate allows for powerful depreciation deductions that can offset rental income and, in specific cases like achieving real estate professional status, offset clinical income. Depreciation is a tax deduction that allows property owners to deduct a portion of a building’s value each year to account for wear and tear, even if the property is actually appreciating in market value. In practice, this can reduce the taxable income generated by a rental property without requiring an equivalent cash expense that year.
Taking advantage of tax-loss harvesting in investment accounts
Selling losing investments to offset the capital gains from winning investments can lower your tax bill. This strategy can effectively turn portfolio losses into tax assets.
Structuring income through an S-Corp or LLC to reduce self-employment taxes
For independent contractors, moving income through an LLC taxed as an S-Corp can significantly lower the burden of self-employment taxes by splitting earnings between a reasonable salary and owner distributions.
Claiming deductions for CME, licensing fees, and work-related expenses
If you work as an independent contractor, you may be able to deduct a range of ordinary and necessary business expenses related to your practice. These can include continuing medical education (CME) courses, medical licensing fees, board certification costs, professional society memberships, malpractice insurance premiums and certain travel expenses related to conferences or clinical work.
Using a defined benefit or cash balance pension plan for additional tax-deferred savings
High-earning practice owners can use defined benefit or cash balance pension plans to contribute substantially more pre-tax income toward retirement than traditional retirement accounts typically allow. These plans are designed to provide a set retirement benefit in the future, which often translates into very high annual contribution limits for older physicians or those with high incomes. Contributions are generally tax-deductible to the business, helping reduce current taxable income while allowing investments to grow tax-deferred until retirement.
Donating to charities or donor-advised funds for tax deductions
Charitable giving remains a strong opportunity for tax-deductions. However, not all charities will be classified as tax-deductible organizations according to the IRS.
Physicians often have complex financial situations involving multiple income streams, retirement accounts, business structures and investment strategies that require specialized tax planning. Working with a CPA or tax expert to advise you on the above strategies can pay off.
Tips every W-2 physician should know
If you’re a W-2 employee, considering these tax-saving strategies could prove useful.
Fund every pre-tax account your employer offers, in the right order
Fund your 401(k) or 403(b), to the employer match (if offered) at minimum. Next, fund your HSA if you are on a high-deductible health plan. Finally, utilize a 457(b) if you are hospital-employed.
For IRS’ contribution limits for 2026 are $24,500 for 401(k)s or $72,000 for combined employer and employee contributions. Those over age 50 will be eligible for an additional catch-up contribution of up to $8,000, with those ages 60–63 eligible for an additional “super catch-up” of $11,250 in lieu of the regular catch-up if their plan allows for it, according to Fidelity.
Negotiate CME, licensure, and dues into your contract
Paying CME, licensure, and dues out of pocket as an employee no longer produces any tax benefit (with exceptions, like employees with impairment-related work expenses). If these costs don’t go into your contract as an employer-reimbursed budget they will drain your take-home pay. Negotiate this line item during every contract renewal.
Check your IRA balance before doing a backdoor Roth
The backdoor Roth is standard practice, but an existing traditional IRA balance can quietly trigger a surprise tax bill due to the pro-rata rule. If you have old IRAs from residency, roll them into your current 401(k) before converting.
Know whether you live in a high-SALT state, and whether you still benefit
For attendings in high-tax states, the state-and-local tax (SALT) deduction picture shifted recently under the One Big Beautiful Bill Act (OBBBA). The maximum annual deduction was reduced for those who have a modified adjusted gross income over $500,000. A short conversation with your CPA about whether itemizing still makes sense can be worthwhile.
If you have any practice ownership, ask about your state’s PTET election
Partner-track physicians and anyone with K-1 income can use pass-through entity tax (PTET) elections. These state-level tax programs allow certain partnerships and S-corporations to pay state income taxes at the business level rather than the individual level, which can help owners work around the federal cap on state and local tax (SALT) deductions. In many cases, this allows physicians to effectively deduct more of their state tax burden on their federal returns than they otherwise could as individual taxpayers. The majority of states now offer some version of a PTET election.
Tips for physicians with any 1099 income
If you earn 1099 income as an independent contractor or practice owner, you have more opportunities to claim deductions. You could claim deductions for:
- Continuing medical education (CME) fees
- Medical licensing and board fees
- Malpractice insurance premiums
- Home office expenses (if you use a specific part of your home exclusively and regularly for business activities, such as charting, telehealth calls, or medical consulting)
- Necessary medical equipment
The following tips can further help you optimize your taxes as a physician with 1099 income.
Treat any 1099 income as a real business from the first dollar
Even if you just make a few thousand dollars through moonlighting, it’s not just “extra cash.” The moment a physician has 1099 income, a new category of 1099 physician deductions opens up. Open a separate business bank account, track your expenses diligently, and start paying quarterly estimated taxes to avoid underpayment penalties.
Deduct work done from home
If you perform any 1099 work at home, the physician home office deduction is completely legitimate. Charting, telehealth, expert witness review and consulting all qualify.
Open a solo 401(k) before year-end
For consistent 1099 income, a solo 401(k) allows you to save for retirement in addition to any employer-sponsored 401(k), allowing additional employer-side contributions tied to self-employment income. This means you can max out your workplace 401(k) through a hospital or group job and still make additional pre-tax or Roth contributions (plus profit-sharing contributions, if eligible) through the solo 401(k) based on 1099 income. Together, these accounts can significantly increase the total annual amount sheltered from taxes compared to using only one retirement plan. Just note that the solo 401(k) account must be established before December 31 to contribute for that tax year.
Run CME through the 1099 business
While W-2 physicians can no longer deduct out-of-pocket CME expenses, 1099 physicians can. If you do any 1099 work, CME that is reasonably connected to it can be deductible against that 1099 income.
Watch the S-corp threshold
The S-corp election is a tax structure where your business income is split into two parts: a “reasonable salary” (which is subject to payroll taxes) and remaining profits, which are taken as distributions that are not subject to self-employment tax. In practice, this can reduce overall payroll taxes once income is high enough to make the savings meaningful. For most physicians with consistent 1099 net income, that break-even point is often around $150,000 per year, though it varies based on state taxes and payroll setup costs. Below that level, the added administrative costs—such as payroll services, bookkeeping and tax filings—can outweigh the tax savings.
Track multi-state exposure if you’re doing locums
If you cross state lines to perform locum tenens work, you may owe taxes in multiple states. Physicians-focused CPAs are often better versed than generalists in locum tenens tax deductions and multi-state filing obligations.
Learn about QBI
Medicine is considered a Specified Service Trade or Business (SSTB) under IRS rules, meaning physicians face income limits that can reduce or eliminate access to the Qualified Business Income (QBI) deduction. The QBI deduction was made permanent under the OBBBA, and it allows many self-employed individuals and business owners to deduct up to 20% of their qualified business income, lowering their taxable income. However, because physicians are classified as SSTBs, the deduction begins phasing out once income exceeds certain thresholds ($483,900 for joint filers; $241,950 for other filers) and is unavailable to many high-earning attending physicians. It can still be valuable for residents with 1099 moonlighting income, part-time attendings, or physicians with taxable income below the phase-out range.
Tips for physicians who own or partner in a practice
If you are an owner of or a partner in a practice, these are some strategies to consider.
Time big equipment purchases for year-end
Practice owners can fully expense qualifying equipment in the year it is placed in service, rather than depreciating it over several years. “Placed in service” means delivered, installed and operational.
Use the Augusta Rule, but use it correctly
The Augusta Rule for physicians allows a practice to rent the owner’s home for up to 14 days per year for legitimate business meetings. The rental income is tax-free to the physician, and the practice deducts the expense. You must have a written rental agreement, fair market rates, meeting minutes and payments directly from the business account.
Set up an accountable plan if you’re an S-corp owner
An accountable plan lets the practice reimburse the physician-owner tax-free for home office costs, cell phones, internet and business mileage. The plan has to exist on paper before reimbursements start.
Put family members on payroll, but only for real work
Employing a spouse or adult child for legitimate work can shift income to lower tax brackets. The work has to be real and paid at a fair market rate.
Consider owning the practice real estate
Owning the building the practice rents, usually through a separate LLC, is a long-term wealth move. The lease payments deduct on the practice side, and depreciation offsets the rental income on the personal side.
Reasonable compensation matters on the S-corp side
S-corp physicians sometimes pay themselves dangerously low W-2 wages to reduce payroll taxes, which can get flagged by the IRS. A CPA can benchmark reasonable compensation accurately by specialty.
Physician tax mistakes costing you money
Filing taxes as a physician isn’t always straightforward. When Sermo members were polled on the biggest challenges around tax planning, the most common answers were understanding complex tax laws and regulations (31%), limited time (11%) and a lack of tax-saving options for physicians (11%).
With the challenges surrounding tax planning, some physicians make mistakes. Some of the biggest tax missteps include failing to separate personal and business expenses, missing the December 31 deadline to establish a Solo 401(k), and ignoring the pro-rata rule when executing a backdoor Roth IRA conversion. Additionally, some physicians overpay when using a generalist CPA instead of one who understands medical practice taxation.
These are some other recurring errors to avoid:
- Paying CME, licensure and society dues out of pocket as a W-2 employee instead of negotiating them into your contract
- Skipping quarterly estimated payments on 1099 income and incurring underpayment penalties
- Starting a backdoor Roth without checking for an old traditional IRA balance
- Missing the solo 401(k) setup deadline of December 31
- Going S-corp too early, before 1099 income justifies the accounting cost
- Ignoring multi-state tax obligations on locum tenens work
- Using a generalist CPA for a return tangled with W-2, 1099 and K-1 income streams
When a physician-focused CPA pays for themselves
Not all physicians need a specialized accountant. Pure W-2 physicians with standard deductions can usually rely on a generalist CPA, but physicians with 1099 income, practice ownership or multi-state locum work are typically better off with a specialized medical CPA. The specialist may pay for themselves by catching niche healthcare deductions and preventing expensive structural mistakes.
A pre-filing checklist for physicians
Run through these steps before your next CPA appointment:
- Separate income streams: W-2, 1099, K-1, investment. Have exact totals ready.
- Pull retirement contribution summaries for every single account.
- Confirm the solo 401(k) was opened before December 31 if you have 1099 income.
- Check prior-year traditional IRA balances before any backdoor Roth conversion.
- For 1099 work, gather home office, CME, equipment, subscriptions, malpractice and mileage records.
- For practice owners, list year-end equipment purchases, Augusta Rule meeting dates and accountable plan reimbursements.
- Confirm state-specific PTET elections if applicable.
- Prepare a short list of specific strategies to ask the CPA about.You can even use this article as a list of items to talk through.
Transform your tax strategy with peer collaboration
The highest-leverage tax moves for physicians are ultimately about structural habits. These include separating income streams, funding the correct accounts in the right order, working with a specialized CPA and timing major moves correctly.
On Sermo, physicians compare notes on what actually works in their own practices. From CPA recommendations and entity decisions to year-end moves and filing-season lessons, your peers are sharing real-world insights. Sign up to Sermo to add to the conversation, contribute to the world’s largest database of drug ratings or earn extra income through paid medical surveys.
