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New Tax Bill - any super creative options available for the Employed Docs?

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  • StarTrekDoc
    replied
    Yeah, CA and NY don't get back nearly the dollars that it puts into the Fed.  It's going to be even more so with the tax reform.   Inept Senators and Representatives we have in Congress for no representing strong enough.   Our Republican California reps rolled over when they had a rare opportunity to extract some bennies--giving even more fuel for those wanting to flip districts like the 49th.

    That doesn't matter; done is done.  Gotta spend time looking how to structure our LLCs now to funnel more through them.

     

    Leave a comment:


  • ENT Doc
    replied
    This is not correct. While blue states are net contributors to the federal budget that doesn't mean red states can now charge disproportionately low taxes or are somehow being subsidized by blue states in the way that's being implied here. Medicaid is largely responsible for these disparities, and for every person on Medicaid those red states are now obligated to kick in more money. Look at the marginal example. One more person goes on Medicaid in a red state. The Feds kick in 50% (on borrowed money) and the state kicks in 50%. This means that in order to pay for all the other things in the state that red state is now incentivized to raise taxes to pay for things that they now can't because of their Medicaid obligation to that person.

    The truth is (and this is supported by The Economist a month or so ago) the state income deduction makes living in high tax states cheaper, which gives the governments more latitude to raise taxes. This is the reverse of what goes on with muni bond funds - they have lower yields such that after tax yield equal the typical bonds for high earners. It's also driven by taxing philosophy, where blue states are blue states for a reason - they like more government, programs and higher taxes. But this myth that blue states subsidize red states' abilities to keep taxes low defies logic.

    Leave a comment:


  • spiritrider
    replied







    The 3.8% net investment income tax applies with a MFJ MAGI >= $250K. The 20% capital gains/qualified dividend tax rate starts at MFJ taxable income >= $479K.

    At income levels < $250K (32% bracket) corporate profits + dividends will be taxed at rate of 21% + 15% = 36% vs. personal income taxed at 32%. At income levels > $479K (37% bracket) corporate profits + dividends will be taxed at rate of 21% + 20% + 3.8% = 44.8% vs. personal income taxed at 37%.

    A C-Corp is not a panacea for pure tax rate savings, but it narrows that gap such that certain strategies may provide net benefits.
    Click to expand…


    I didn’t know if it was additive or multiplicative…like if the corp gets taxed at 21%, and then the shareholder gets taxed at 23.8%, then I didn’t know if it would be, using $100k as an example, 100,000 – 21,000 – 23,800 = $55,200 (44.8%) or if it would be $100,000 * (1-.21) * (1-.238) = 100,000 * .79 * .762 = $60,198 (39.8%).

    Basically, is the dividend rate tied to what the corporation paid on the tax, or what the shareholder receives?
    Click to expand...


    You are correct, in my attempt to point out that C-Corps are subject to double taxation. I neglected to use a formula that as you pointed out, dividends come out of corporate after-tax profits. My Algebra teacher would be greatly disappointed.

    While your correct number demonstrate that C-Corps might be more competitive, people still need to focus on more than just the lower 21% corporate rate.

    Leave a comment:


  • Zaphod
    replied







    Respectfully, you have it backwards. Al of those states are net CONTRIBUTORS to the federal budget. It’s precisely because they don’t get excessive federal assistance that they have high local taxes. Generally the low tax states are getting disproportionately more federal resources. Obviously, there is corruption/mismanagement as well, but my point is the idea out there that red states are subsidizing blue states is not accurate.

    https://wallethub.com/edu/states-most-least-dependent-on-the-federal-government/2700/
    Click to expand…


    To those that don’t want this to be political, I was just responding to the very charged OP “piggy bank” comment.

    Blue states of course are going to provide more to the federal budget than red states because they make more money. If the average income in state A is 100k and state B is 30k and both states get back 50k in federal services per capita, then state A gets less of a ROI. There are some other concerns in the comment section from that article that seem legitimate.

    But if a doctor in each state makes 500k, why should the doctor in state B pay 150k in federal taxes while the doctor in state A pays 120k? Just because State A charges 50k in state income tax and 30k in property taxes because your property values are inflated by silicon valley or hollywood? Shouldn’t that 80k that is being paid to supply the services in the state that you choose to live in be kept separate from the money you pay to the federal gov’t to support those separate services?

    Maybe California is not the best example of a poorly run state – but didn’t they just pass a 3 billion dollar subsidy on electric cars, mainly to bail out Tesla? Illinois is of course a far better example of a poorly run state. Connecticut is up there as well.
    Click to expand...


    California has the worlds fifth strongest economy on its own, and there are more people in LA county than 41 states. So far, they can afford to have some poorly run elements. As a % of debt/gdp, California is the middle of the pack, when standardized for electoral votes its the best in the nation. Many small states are frankly economically non viable and states like California allow them to exist.

    Someone on twitter just recently did an interesting breakdown of these things:

    https://twitter.com/RajaKorman/status/943227321288404993

    Like many things lots of these talking points are overblown, like Chicago having a crazy murder rate, when it isnt even in the top ten.

    Leave a comment:


  • StatBariumEnema
    replied




    Respectfully, you have it backwards. Al of those states are net CONTRIBUTORS to the federal budget. It’s precisely because they don’t get excessive federal assistance that they have high local taxes. Generally the low tax states are getting disproportionately more federal resources. Obviously, there is corruption/mismanagement as well, but my point is the idea out there that red states are subsidizing blue states is not accurate.

    https://wallethub.com/edu/states-most-least-dependent-on-the-federal-government/2700/
    Click to expand...


    To those that don't want this to be political, I was just responding to the very charged OP "piggy bank" comment.

    Blue states of course are going to provide more to the federal budget than red states because they make more money. If the average federal tax amount paid in state A is 50k and state B is 20k and both states get back 35k in federal services per capita, then state A gets less of a ROI. There are some other concerns in the comment section from that article that seem legitimate.

    But if a doctor in each state makes 500k, why should the doctor in state B pay 150k in federal taxes while the doctor in state A pays 120k? Just because State A charges 50k in state income tax and 30k in property taxes because your property values are inflated by silicon valley or hollywood? Shouldn't that 80k that is being paid to supply the services in the state that you choose to live in be kept separate from the money you pay to the federal gov't to support those separate services?

    Maybe California is not the best example of a poorly run state - but didn't they just pass a 3 billion dollar subsidy on electric cars, mainly to bail out Tesla? Illinois is of course a far better example of a poorly run state. Connecticut is up there as well.

    Leave a comment:


  • Lithium
    replied




    If employers are getting a big tax break, do you expect them to pass on some of the money to employed physicians?

    Should employed physicians ask for raise?

     

     
    Click to expand...


    Great question.  I don't expect any kind of gift from an employer, but demand should increase if employers get a tax break.  More importantly, I think supply could drop if doctors find working a pass-through business a more competitive option than it used to be.

    I don't know if it will work, but I would cite these factors as reasons for a raise when my contract is up.  MGMA data were gathered before this new law, and the landscape has changed.

    Leave a comment:


  • u500_insulin
    replied
    If employers are getting a big tax break, do you expect them to pass on some of the money to employed physicians?

    Should employed physicians ask for raise?

     

     

    Leave a comment:


  • DMFA
    replied




    The 3.8% net investment income tax applies with a MFJ MAGI >= $250K. The 20% capital gains/qualified dividend tax rate starts at MFJ taxable income >= $479K.

    At income levels < $250K (32% bracket) corporate profits + dividends will be taxed at rate of 21% + 15% = 36% vs. personal income taxed at 32%. At income levels > $479K (37% bracket) corporate profits + dividends will be taxed at rate of 21% + 20% + 3.8% = 44.8% vs. personal income taxed at 37%.

    A C-Corp is not a panacea for pure tax rate savings, but it narrows that gap such that certain strategies may provide net benefits.
    Click to expand...


    I didn't know if it was additive or multiplicative...like if the corp gets taxed at 21%, and then the shareholder gets taxed at 23.8%, then I didn't know if it would be, using $100k as an example, 100,000 - 21,000 - 23,800 = $55,200 (44.8%) or if it would be $100,000 * (1-.21) * (1-.238) = 100,000 * .79 * .762 = $60,198 (39.8%).

    Basically, is the dividend rate tied to what the corporation paid on the tax, or what the shareholder receives?

    Leave a comment:


  • Zaphod
    replied




    Stupid question:  so if I am understanding this correctly, a self-employed physician who operates his or her business as a solo proprietor (does NOT need to be an S corp for this, right?)  and has total gross taxable income under 315K (if married), WILL save 315k x.02 x.24 = roughly 15k a year on taxes, right?  And if that physician also happens to have some W2 income which puts him over 315k in total, then they are out of luck, correct?
    Click to expand...


    Sounds about right, and my current understanding. Hopefully wrong.

    Leave a comment:


  • nachos31
    replied
    As hard as it may seem, let's please keep the political commentary on both sides out of this and focus on the actual questions posed.

    Leave a comment:


  • Slav4ikMD
    replied
    Stupid question:  so if I am understanding this correctly, a self-employed physician who operates his or her business as a solo proprietor (does NOT need to be an S corp for this, right?)  and has total gross taxable income under 315K (if married), WILL save 315k x.02 x.24 = roughly 15k a year on taxes, right?  And if that physician also happens to have some W2 income which puts him over 315k in total, then they are out of luck, correct?

    Leave a comment:


  • Lithium
    replied
    Blue states subsidize red states because 11 of the top 12 states in income and DC are all blue states.  The bottom 17 states are ALL red states.  It isn't really that complicated.  If those of you in blue states don't like it, push for a flat income tax.

    Leave a comment:


  • hightower
    replied




    Respectfully, you have it backwards. Al of those states are net CONTRIBUTORS to the federal budget. It’s precisely because they don’t get excessive federal assistance that they have high local taxes. Generally the low tax states are getting disproportionately more federal resources. Obviously, there is corruption/mismanagement as well, but my point is the idea out there that red states are subsidizing blue states is not accurate.

    https://wallethub.com/edu/states-most-least-dependent-on-the-federal-government/2700/
    Click to expand...


    Exactly.  The GOP knows this very well and is intentionally trying to mislead people into believing the opposite because it obviously helps them win elections.  Right now their propaganda machine is very strong and doing an excellent job deceiving the masses.  Thank you FOX news

    Leave a comment:


  • Zaphod
    replied
    I dont think its as rosy even for self employed docs as you think. Im self employed but will likely be above the cutoff on total income so wont get any of that benefit. It only will work if you actually have pass through businesses, and for those docs its not a loophole, its an actual business setup and the tax reflects it.

    Leave a comment:


  • Zaphod
    replied







      and if you are in NY/NJ/CT/IL/CA, enjoy being the piggy bank that funds everyone else’s tax cuts.

     
    Click to expand…


    As somebody not in those states, I’m going to enjoy no longer being the piggy bank that pays for those states’ poorly run governments and excessive hand outs. Why in the heck does CA need to charge such a high state income tax. The amount they should be collecting from the tourism business, agriculture and tech companies should make the state income tax much lower.

    **I am in an average to slightly above taxed state and the loss of state income tax deductions will negatively affect me, but I’m very happy with the change even if it costs me a little bit. Overall, I’ll benefit from the tax reform though.
    Click to expand...


    Ah, come on. Lets not get political or afactual.

    Leave a comment:

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