As a doctor, your time is precious, and your financial life is complex. From managing student loans early in your career to navigating practice ownership or preparing for retirement, your journey is unlike any other profession. No matter where you are in your career journey, the end of the year is the perfect time to implement tax strategies to help optimize your financial situation.

In this article, we outline the most effective year-end tax tips tailored to high-earning doctors like you. These strategies can help reduce your tax bill while aligning with your long-term financial goals, ensuring your money continues to work as hard as you do. Please note, you should contact your legal and tax professionals before taking any action.

1. Maximize contributions to retirement accounts

Retirement planning is crucial for doctors, especially given the potential for high lifetime earnings and late career starts due to years in training. When possible, max out your 401(k) contributions, which for 2024 allow up to $23,000 (or $30,500 if you're over 50). If you believe your tax rate will be higher in retirement, consider contributing to a Roth 401(k), which offers tax-free withdrawals in retirement.

For practice owners, consider a solo 401(k) or a defined benefit plan, which allow for even higher contributions and significant tax deferral. These accounts are particularly advantageous for offsetting higher taxable income.

‍2. Consider Health Savings Accounts (HSAs)

As a doctor, you may have access to a high-deductible health plan, making you eligible for an HSA. This account offers triple tax advantages — pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. For 2024, you can contribute up to $4,150 for individuals or $8,300 for families. Plus, your HSA funds never expire, making it an excellent supplemental retirement vehicle.

3. Explore a Backdoor Roth IRA

Due to income limits, high-earning doctors are often ineligible to contribute directly to a Roth IRA. However, a backdoor Roth IRA conversion allows you to contribute to a traditional IRA and then convert it to a Roth IRA. While this strategy may trigger taxes in the year of conversion, it ensures tax-free growth and withdrawals in the future — perfect for creating tax diversification in retirement.

If you're new to backdoor Roth conversions, consult with your financial advisor or accountant to ensure the process aligns with your overall tax strategy.

4. Optimize charitable giving

If charitable giving is part of your financial plan, consider donating appreciated securities rather than cash. This allows you to avoid capital gains taxes while taking a deduction for the full market value of the donation.

Alternatively, consider setting up a donor-advised fund (DAF), which allows you to donate assets, take the immediate tax deduction, and distribute funds to charities over time. This is an ideal way to maximize your impact and manage your taxes strategically.

If you’re 70½ or older, you can also leverage qualified charitable distributions (QCDs) from your IRA to satisfy your required minimum distributions (RMDs) while reducing your taxable income.

5. Understand RMDs

Required Minimum Distributions (RMDs) play a crucial role in tax planning, not just for retirees but for anyone contributing to tax-deferred accounts. Even if you’re years away from retirement, understanding the rules and planning ahead can significantly reduce your future tax burden.

RMDs are mandatory withdrawals that the IRS requires from tax-deferred accounts starting at age 73 (or age 72 if you were born before 1951). These withdrawals are treated as ordinary income for tax purposes. Missing the deadline for taking RMDs — typically December 31st — can result in a 25% penalty on the amount not withdrawn.

Even if you’re not yet close to the RMD age, proactive planning is key. The size of your RMDs depends on your account balance and your life expectancy. Larger account balances mean higher RMDs, which can push you into a higher tax bracket during retirement. To minimize this risk, you may want to consider strategies like partial Roth conversions to reduce the balance of your tax-deferred accounts before RMDs begin, ultimately lowering the tax impact of future distributions.

6. Use tax-loss harvesting

As a high-income professional, you may face significant capital gains taxes. Tax-loss harvesting is a sophisticated investing strategy that can turn market dips into tax deductions. By claiming a loss on an investment and creating a "bank of losses", you can lower your tax bill and keep more of your hard-earned money. Even better, you can reinvest those savings, creating a compounding effect on your wealth.

‍7. Plan for family gifting

High earners often look for tax-efficient ways to pass on wealth to their heirs. For 2024, you can gift up to $18,000 per recipient (or $36,000 if married) without incurring gift tax. Gifting appreciated securities to family members in lower tax brackets can help reduce future capital gains taxes, creating an efficient wealth transfer strategy.

‍8. Max out your practice’s tax benefits

If you own a practice, year-end is a great time to review tax-saving opportunities. From setting up or maximizing retirement plans for employees to making strategic equipment purchases that qualify for Section 179 deductions, there are ways to reduce your taxable income while reinvesting in your practice.

9. Defer income and accelerate deduction

For high-earning doctors, managing when income is recognized and deductions are taken can have a significant impact on your tax liability. If possible, defer any bonuses, practice income, or other payments until the following tax year to avoid pushing yourself into a higher tax bracket for the current year.

At the same time, consider accelerating deductions by prepaying deductible expenses, such as medical malpractice insurance premiums, state taxes, or practice-related expenses, before December 31st.

This approach can help you lower your taxable income for the current year while strategically planning for the next. Be sure to consult with your tax advisor to ensure these strategies align with your overall financial plan and comply with IRS regulations.

10. Work with an integrated financial team

Your financial life requires coordination between your accountant and your financial advisor. At Earned Wealth, we bring these experts under one roof and work together to help ensure your wealth and tax strategies are seamlessly aligned. In addition, we are fiduciaries who specialize in working with doctors, so we deeply understand the ins and outs of your career and can help provide guidance along the way.

The bottom line

As the year comes to a close, take the time to educate yourself on these strategies and make sure your financial plan is optimized for your needs. Proactive tax planning can save you thousands of dollars while setting you up for long-term financial success.

At Earned Wealth, we understand the complexities of a doctor’s career and are here to provide  a tax-smart, integrated approach to building your wealth. Schedule a free meeting with our team to ensure you're taking full advantage of every opportunity to build a better financial future.