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It’s not too late, but we’re getting pretty darn close! April 17th is when your taxes are due this year since the 15th falls on a Sunday, so with the few extra days left, take some time with our podcast guest, Mr. Eric Levenhagen. He specializes in tax accounting for optometrists and healthcare professionals. Whether you are a private practice owner or an independent contractor, there are a few ways that you can maximize your deductions and prepare for the more significant tax law changes that will come into effect in 2018.
1. Understand Your Classification Options
- Tax advantages differ whether your are filing a traditional W-2 (where you are an employee) or with a 1099 (independent contractor). Most of the tax advantages for healthcare providers come when you are filing as a small business owner.
Even within small businesses, however, there are options for the type of business you establish, with each having different tax and legal advantages.
- Sole Proprietorship: This is the simplest business legal entity. In a sole proprietorship you file taxes for the business on your personal tax return; the business does not file its’ own taxes. You will be taxed and have to pay Medicare and Social Security taxes on the profit you make from the business.
- S-Corporations: This is the most common type of business ownership option within eyecare. The owners or shareholders of S-Corporation businesses file their share of profit and loss (called distributions) from the business on their own individual taxes. These distributions are not subject to Medicare and Social Security taxes which is one of the big tax advantages of S-Corporation over Sole Proprietorship. There are also some deductions possible for S-Corporation owners that Sole Proprietors aren’t eligible for.
2. If you are filing your taxes this year and feel like you haven’t seen any changes from the tax law, you’re right!
The new tax laws passed won’t come into effect until 2018 (which you’ll be filing next spring). To benefit for the new Tax Cuts and Jobs Act of 2017, you’ll likely need to make changes to the structure of your business now in preparation. While there are some major incentives for small business owners in this new bill (20% pass-through deductions for S-Corporation businesses for example), there are also going to be a lot fewer deductions that small business owners can file for next year (like meals and entertainment deductions). Consider looking at these options to maximize your returns:
- Establishing multiple businesses within your practice to reduce your overall practice income. Eric details this business practice more extensively in the podcast!
- Property tax deductions will be capped at $10,000, which may make renting your business property more tax advantageous
- Upgrading your office? The new tax law is allowing for 100% write-off for both new and used equipment under Section 179. You can immediately deduct up to $1 million of equipment expenditures starting next year.
