How can I reduce taxes? (120k/year w2 salary + 380k/y distribution, 18k/yr 401k)

[boglechu]

I am a physician in California. Married. No kids yet.

For 2016, my taxable income was about $500k. $120k was W2 income and 380k was distribution from my s-corp. I put away $18k into 401k plan. Similar for 2017.  Besides 401k deduction, mortgage interest deduction, property tax, etc, I didn't have anything else to deduct and took the standard deduction.

I have 28k on rollover ira from residency/fellowship.

I have a $1.2 million dollar home with $1 million mortgage remaining over 30 years. Interest rate at 3.375%.

I have $100k left in student loans at 4.5% which I haven't gotten around to refinancing.

I have about 75k in cash and 25k in stocks (total stock market etf)

My car is paid off.

I was told by a friend to start investing in rental properties and forming real estate investment LLC. Any other thoughts?

[ENT Doc]

You're single with $800k negative net worth on a $500k income.  I would focus on expenses and reducing lifestyle inflation rather than leveraging up in an inflated and (literally) inflamed market.

[Hatton]

You are already invested in real estate.  Your house.  Do you have an efund?  If not the 75k needs to go into a CD or MMF. I am sure your mortgage and property taxes are large so you need a bigger  fund. You should either open a solo k and roll that ira money into it (would require a side gig) or roth convert it and pay the tax.  Then you can do backdoor roths.  You do not really have much in the way of retirement savings.  I would max this prior to branching off into real estate.

[Dr. Mom]

So, if you made $500K in 2016 and in 2017, you should have 200K-300K in retirement savings assuming a 20-30% savings rate into retirement.  Where is that on your balance sheet?  Unless you forgot to mention designated retirement savings, you need to focus on the basics and get your personal balance sheet (net worth) cleaned up before heading off into a leveraged real estate portfolio.

[boglechu]

I paid off $200k in student loans at 5.0-6.5% interest Also have $100k equity in house (wife has other $100k).

[Zaphod]

boglechu wrote:

I am a physician in California. Married. No kids yet.

For 2016, my taxable income was about $500k. $120k was W2 income and 380k was distribution from my s-corp. I put away $18k into 401k plan. Similar for 2017.  Besides 401k deduction, mortgage interest deduction, property tax, etc, I didn’t have anything else to deduct and took the standard deduction.

I have 28k on rollover ira from residency/fellowship.

I have a $1.2 million dollar home with $1 million mortgage remaining over 30 years. Interest rate at 3.375%.

I have $100k left in student loans at 4.5% which I haven’t gotten around to refinancing.

I have about 75k in cash and 25k in stocks (total stock market etf)

My car is paid off.

I was told by a friend to start investing in rental properties and forming real estate investment LLC. Any other thoughts?

Click to expand...

Why are you shortchanging yourself so much in the tax deferred retirement portion of your investing? I dont see much tax benefit there as you'll be near payroll max anyway. You could have put away another 36k tax deferred by giving yourself a slightly larger salary, and reduced your risks of an audit which are pretty ************************ high right now. You could have an HSA for your healthcare, add 6750 or so deducted. You could probably swing a cash balance account as well and really sock it away tax deferred. Where you draw the line is up to you.

You are very into real estate already as others have pointed out.

[Dr. Mom]

boglechu wrote:

I paid off $200k in student loans at 5.0-6.5% interest Also have $100k equity in house (wife has other $100k).

Click to expand...

Keep going with student loan payoff.  Make decisions on your S corp and get going on designated retirement savings much of which will be in taxable for you.  Hold off real estate investing for a little bit until you have a clearer plan for all the other questions you've been posing on the forum.