Physician Tax Planning and Retirement Optimization

Physicians face unique tax challenges combining high W-2 income with limited deductions and education debt. This guide covers the key tax planning areas where physicians can generate meaningful savings.

W-2 income with limited deductions. Most employed physicians receive W-2 income, which means few above-the-line deductions are available. The TCJA eliminated the unreimbursed employee expense deduction through 2025, and if reinstated, it would only benefit those who itemize. Your primary tax levers are retirement plan contributions and timing of income where possible.

Student loan interest phase-out. The student loan interest deduction ($2,500 maximum) phases out completely at $95,000 MAGI single or $195,000 MFJ. Most physicians hit this threshold early in their careers, making the deduction worthless despite carrying significant education debt.

Side practice income (1099). If you do locum tenens, consulting, or expert witness work, that income is reported on Schedule C and subject to self-employment tax. An S-corp election can reduce SE tax by paying yourself a reasonable salary and taking the remainder as distributions.

Retirement plan catch-up. Physicians should maximize 401(k) contributions, including catch-up contributions if over 50. If your employer offers a 457(b), you can contribute to both plans, effectively doubling your tax-deferred savings. Backdoor Roth conversions are essential at physician income levels.

The tradeoff: Physicians often have high income but limited tax planning options compared to business owners. A CPA's value is in optimizing the levers you do have -- retirement accounts, side income structuring, and investment tax efficiency -- rather than finding dramatic deductions.