In this latest podcast, Dave sounds off on 3 little known tax strategies that many physicians neglect and forget to remember.
– The first strategy involves how a physicians can get up to $500,000 tax free (Hint: you must be married or this gets cut in half)!
– The second strategy shows a critical strategy that many physicians get caught unaware with a big tax bill when instead it should be a small tax bill that could easily be fixed!
– The third strategy is the forgotten strategies that can easily lead to tax savings of $8,000 to $10,000 EVERY year.
This is Dave Denniston with the Capital Advisory Group and welcome to the latest Freedom Formula for Physicians podcast.
Here in this month we are going over tax reduction and elimination strategies to help lower your taxes whether now or in the future…
Doctors are being robbed by Uncle Sam every year. He is stealing our hard earned dollars.
Our money is being cut in half with every paycheck. The average doctor is being plundered, robbed, and stepped on.
But, there’s something you can do about it.
As physicians inch closer and closer to retirement, there are three key strategies that we need to be aware of.
Key# 1: Unlocking Tax-Free Home Equity. The first key is a strategy that every physician should employ. As a matter of fact, they may be able to use it twice!What a lot of doctors may not be aware of is the homestead rule. When you are married & sell a home that you’ve lived in 2 out of the last 5 years, $500,000 of equity from your purchase price is tax free (or $250,000 of equity if you are single).Let’s say you bought your home 20 years ago for $200,000. Today, it is worth $500,000. $300,000 of equity is completely tax free!As a matter of fact, the house could be worth up to $700,000 and all the proceeds still be tax free if you are married. (Again, cut that in half if you are single).
Consider that you could use this twice with a second home, like a cabin! The same rule can apply!
Let’s say you have a cabin that you don’t go to very often. The kids aren’t coming there anymore and it’s something that you and your spouse use every so often. You are getting tired of maintaining the place now. You are tired of mowing the lawn, cleaning the house, raking the yard, cleaning the gutters, dealing with light bulb changes, changing smoke detectors at two different places!
Live there for 6 months and more out of the year. Let’s say you are there 6 months and a day. If you do that, change your filing address with the IRS, change your utility bills, and other regular mail to go there, you can show that it is your primary residence.
You stay there another year and let that fall under the homestead, 2 out of 5 years rule.
Keep in mind you can utilize this same strategy with rental homes as well!
Let’s say 30 years ago you bought $1,000 worth of Microsoft to now being $100,000.
Your heirs get a step-up in basis at your death from $1,000 to $100,000. They will owe NO capital gains or income taxes when they sell the position!!!! (Although, they could owe estate taxes depending on those limits)
With appreciated positions, you want to be careful of selling hugely appreciated positions- especially if you are not planning on using the money and you know it will be passed onto the kids.
For those of us that do receive these inherited positions, make sure that the records reflect a step-up in basis. Often that gets missed at death and you get hit with a big tax bill that wasn’t necessary!!
Key# 3: The Forgotten Retirement Plan. Lastly, most physicians have a 401k in a for-profit entity or a 403b in a non-profit entity.
Most everyone maxes out a 401k or 403b. That’s no secret.
A lot of hospitals have a second retirement plan- a 457 deferred compensation plan.
You want to take advantage of that!
It can literally double your contributions and tax deductions TODAY!
Make sure to check out and see if you have not one retirement plan, but two! This way you can max out not just the normal, $18,000, $20,000, $24,000. You can double that for a total of $36,000, $40,000- maybe even $48,000 if you are over 50 years old!
Our money is hard-earned and hard-fought for. Let’s keep every penny (LEGALLY) possible.
Protect it, guard it.
Implement the tax-free equity home strategy and keep $500,000 of gains in your pocket without paying ANY taxes on it!
Be careful of selling hugely appreciated positions if you are passing them onto your kids.
If instead you inherit the positions, make sure you get a step up in cost basis!
Lastly, check out your benefits and make sure you are taking advantage of the SECOND forgotten retirement plan to max out your deductions.
The choice is yours. Choose wisely and ask for help if you need some guiding, poking, and prodding along the way.
He’s glad to answer any questions about insurance policies or other financial matters. You can contact him at (800) 548-1820, at firstname.lastname@example.org, or visit his website at http://www.DoctorFreedomBook.com to get a copy of The Freedom Formula for Physicians.