Since medical practices are fortunately considered to be one of the most important drivers of economy, there are lots of tax /peaks offered by the local and state governments for medical practitioners. The immense opportunities for young health care professional to write off their practice-related expenses has now made hiring of new employees and construction of a new medical facility slightly less of a daunting task. Following is a quick list of tax-/peaks and related issues to go through before you file your return this year.
According to IRS, for an expense to be deductible, it has to be both “ordinary” and “necessary”. By “ordinary” and “necessary”, IRS implies such expenses that are suitable, helpful, appropriate and commonly accepted in your profession. IRS has set up rigorous checks in place to identify any discrepancies in this regard so you may like to find a tax professional to make full but legitimate use of this incentive.
Ifyou receive your income as wages that show up on W-2, the incentive for job-related expenses drastically reduces, if not eliminates, for you.
Tax deduction for doctors receiving their income as wages fall under Schedule A, as job expenses and certain miscellaneous deductions. The first road block you hit while seeking such a deduction is that your expenses have to exceed 2% of your adjusted gross income in order for the first $1 deduction. For example if you earn $200,000, the figure you need to exceed to get the deduction is $4000 worth of expenses. However, if you are subject to the alternative minimum tax, there is no tax benefit for deductions even above 2% threshold.
In the wake of the limitations on tax-benefits for W-2 wage earners, many creative approaches have taken birth. A very popular one is to ask your employer to pay for your Continuing Medical Education (CME) which is kind of a win-win for you both in that he is relieved of the payroll tax, and you of the income that you would receive only to turn around and pay for your CME.Find a tax professional for further guidance about other options available for W-2 wage earners.
Whatever you want to claim as a deduction, keep full documentation of it. IRS, being an auditing body,reserves full right to demand invoices, receipts, credit card statements and other forms of payments. Keep one thing in mind: after-tax money is the only money you can blissfully enjoy. Squandering $1 for a deduction of few cents does not make much sense.
Your decision where to locate your business decides what incentives you deserve by the state and federal governments. There is a lot of valuable information about the state and federal policies in regard to the available tax-/peaks that you can easily access by seeking the services of a professional tax preparer or an accountant. However, a /pief summary of what kind of options some of the states are offering, is provided below.
California has financing options related to locating in an area which is environmentally challenged, hiring people in an enterprise zone and getting a thermal or solar power system installed. Alabama has tax-exemption bonds to build medium to large practices with a $2 million to $3 million project cost. This translates into lower interest rates, reduced sales taxes on construction materials and shrinked property taxes. Illinois reimburses employers half the cost incurred on employees’ training and allows some low-interest business loans. There are also additional incentives for locating in a designated Enterprise Zone. Texas has its own treats for health-care professionals, including the Physician Education Loan Repayment Program (PELRP). Physicians, who agree to practice for four years in areas running a scarcity of primary-care health professionals, can receive incentives from the Texas government worth up to $160,000 for repayment oftheir medical school loans.The PELRP website features a detailed factsheet of the amount of dollars appropriated for PELRP in the budget, and application for enrolment.
Hobart, a city in Indiana, recently offered 10-year tax abatements for a physician who plans to build a $3 million dollar facility for medical practice. Mark Huddle, a Chicago attorney specializing in municipal and state government matters, says that business in Will County, Illinois, can get upto 50% abatements although they solely apply to improvements made to the properties. “Typically, they are just looking for improvements of any kind”, Huddle says. “They are happy you are investing money in their community.”
For Kansas physicians, there is an option to apply for the industrial revenue bonds in the city or county they plan to build their practices in. The bonds completely finance practice’s land, medical facility and equipment, allow a sales tax exemption for labor and construction materials purchased, and a complete property tax exemption for up to ten years.
If you are in California, MVW Services in Artesia, CA can guide you further in this regard.
