Since we are coming up towards the end of year, we asked the team at Doc Wealth to share their top tips for clinicians to save on taxes. Doc Wealth is a physician-founded tax planning and business services firm serving 650+ doctors across all 50 states. They focus exclusively on clinicians, including tax planning, filing, payroll management, bookkeeping, and entity formation.
Tick, tock. With the calendar ready to flip, we're serving up five strategic tax moves that could save you serious cash. Think of this as your financial meal prep for 2025 – except instead of chicken and rice, you're portioning out tax savings. So grab your calculator, your favorite snack, and read on.
The Kitchen Timer Is Running
Americans are expected to collectively owe approximately $4.1 trillion in federal taxes this year. As a 1099 physician in the 35-37% tax bracket, nearly four out of every ten dollars you earn goes straight to Uncle Sam. But strategic moves made right now could significantly reduce what you owe. Consider this your recipe for tax savings.
1. The Main Course: Maxing Out Your Retirement Contributions
For 1099 physicians, retirement contributions aren't just side dishes; they're the entrée that keeps you fed for years to come.
2025 Limits:
- Solo 401(k): Up to $70,000 total ($77,500 if 50+)
- SEP IRA: Up to 25% of net income, max $70,000
You can contribute as both employee AND employer. On a $250K net income, you can contribute $70,000 to a solo 401(k) and save roughly $25,900 in federal taxes.
Do This: Set up a solo 401(k) or SEP IRA before December 31st. Most can be established online in under an hour.
2. Drinks Edition: Squeezing Out Savings
If you portfolio has some sour spots, i.e., losing investments, we can turn that bitterness into something refreshingly profitable.
Real Dollar Impact: Made $50,000 in gains this year from that tech stock you bought during residency, but have some underperforming investments down $20,000? Sell the losers and you’ll save $4,760 in capital gains tax on your $30,000 net capital gain. Use $3,000 in excess losses against ordinary income for another $1,110. Total: nearly $6,000 saved.
PS: The wash-sale rule says if you repurchase the same security within 30 days, the IRS will disallow your loss deduction. It's like telling yourself you'll save the leftover pizza for tomorrow, then eating it at midnight. However, it’s worth noting that these wash-sale rules do not currently apply to cryptocurrency. This provides a great tax savings opportunity if you have cryptocurrency that has temporarily decreased in value.
Do This: Review brokerage accounts and evaluate if you should sell losing positions before December 31st.
3. The Potluck Strategy: Bunching Your Charitable Contributions
Real Dollar Impact: Normally donate $20,000 annually to your alma mater, local hospital foundation, and other causes? Instead, use a donor-advised fund (DAF) to donate $40,000 in 2025 and take 2026 off. That extra $20,000 in deductions saves $7,400 federal plus your state rate on top. In California? Add another $2,600 for a total of $10,000 saved. Now that's a potluck worth attending.
Bonus move: Donate appreciated stock to avoid capital gains tax AND get the full deduction. With $20,000 in stock bought for $10,000, you save $9,780 total. Win-win, like successfully placing an IV on the first try.
Do This: Use donor-advised funds to front-load contributions in high-income years. Since donations made via credit card count as of charge date, no need to worry about your check getting lost in the mail like that casserole dish you lent out last Thanksgiving.
4. Feast on Business Deductions: The 1099 Advantage
Welcome to the all you can deduct opportunity, exclusively for 1099 physicians. You can literally load up your plate!
Potentially Deductible Expenses for 1099 Physicians:
- Home office: Regular and Exclusive-use space for charting, telemedicine (i.e., primary place of business)
- Mileage: 70¢ per mile between work sites
- Professional: Malpractice insurance, medical equipment, dues, continuing education
- Technology: Laptop, phone, EMR software used in the business
- Health insurance premiums: Fully deductible
Real Dollar Impact: With $25,000 in legitimate expenses ($8K home office, $5K mileage, $4K CME, $3K insurance, $5K tech), you save roughly $13,000 in taxes. That's a hearty serving of savings.
Do This: Review all business expenses. Make year-end purchases, equipment, software, prepaid insurance, before December 31st.
5. Don't Let the Bill Get Cold: Making Quarterly Estimated Tax Payments
Have a side hustle? You need quarterly estimated tax payments. Think of it like paying for your meal as you go instead of letting the tab pile up. The fourth quarter payment for 2025 is due January 15, 2026, but paying before December 31st can help you avoid underpayment penalties for the full year.
Real Dollar Impact: The IRS underpayment penalty hovers around 8%. On a $50,000 underpayment, you could owe $4,000 in penalties.
Safe harbor rule: Pay 110% of last year's total tax liability to avoid penalties.
Do This: Had a jump in income? Make an estimated payment through IRS Direct Pay or EFTPS before January 15th. Your April self will thank you.
Final Checks
Year-end tax planning works best when it’s done proactively and with a clear understanding of how different tax strategies interact. Once December 31 passes, many of these options are no longer available, which is why reviewing them ahead of time matters.
For physicians with multiple income streams or 1099 work in particular, the order and timing of tax decisions can have a major impact on the final outcome. While some clinicians work with a CPA, sometimes it helps to work with a firm that specializes in tax planning for clinicians, like Doc Wealth. Whatever approach you choose, give yourself time to review your options before the year closes. If you need help reviewing your personal situation and opportunities for tax savings, please schedule a free 15-minute consultation with us here.
PS: Marit has no financial or advertising relationship with Doc Wealth
Disclaimer:
This material is intended for educational and informational purposes only and does not constitute tax, legal, accounting, or financial advice. The content is general in nature and may not apply to your specific circumstances. Tax laws and financial regulations are subject to change and interpretation, and the application of these laws can vary based on individual situations. Before making any decisions, you should consult with a qualified tax advisor, legal counsel, or financial professional.
