7 Tax Deductions Doctors Miss

I have found tax knowledge among doctors to be very low, so many doctors dive into questionable investments and “tax shelters” to save small amounts of taxes. But doctors and other high earners can still find ways to get more tax deductions. Today, let’s look at effective ways for doctors to get tax exemptions to reduce their tax liabilities.

#1 Tax Deferred Retirement Plans

Tax-deferred retirement plans are the biggest tax deduction I see doctors miss all the time. I would guess less than one-third of physicians actually exceed all retirement account options available to them. Some simply don’t save enough money (a related, but separate issue), while others simply don’t realize how much money they can get from these things with huge tax benefits.

Every dollar deposited into a tax-deferred retirement account is tax-free this year. If you are in a very high tax bracket and have high state and local income taxes, you may have a marginal tax rate closer to 50%. That means for every $2 you put into a retirement account, you save $1 on your tax bill. That is very good.

If you’re a contractor paid on 1099s, you can contribute 25% of your salary to a SEP-IRA, up to $72,000. [2026 — visit our annual numbers page to get the most up-to-date figures.]. For a solo 401(k), you can contribute $72,000, but if you’re over 50, you can also contribute up to $8,000 in income (that option isn’t available in a SEP-IRA). If you are between the ages of 60-63, you can add another $11,250.

If you’re a salaried employee with W-2s, you may be limited to as little as $24,500 in a 401(k), but most 401(k)s will match or at least allow you to match up to a limit of $72,000. If yours isn’t there, I suggest you talk to your employer.

A defined benefit plan can allow you to shelter more money from taxes, sometimes an additional $30,000, $50,000, or more.

More info here:

How to Reduce Income Taxes

Tax Policies: Have Fun But Also Change The Right Ones

#2 Backdoor Roth IRA

This does not give you a tax break. But it allows you to protect your retirement investments from any future taxes. A Backdoor Roth IRA is a better option than many insurance-related tax shelters that salespeople often push. You can contribute up to $7,500 to a non-deductible IRA [2026] for you and $7,500 for your spouse (plus an additional $1,100 if 50+). After that, you can immediately convert them to a Roth IRA. You will pay taxes this year, but then it grows tax-free.

There is one catch: you can’t have another SEP-IRA or traditional IRA because of the pro-rata rule, but there are ways around this for many, like rolling those IRAs into a 401(k). For a step-by-step process for creating a Backdoor Roth IRA, read The Backdoor Roth IRA Tutorial.

#3 Health care

Health insurance is expensive. But at least you can pay for it with pre-tax money. Your health insurance premiums can be deductible business expenses, as can contributions to a Health Savings Account (also known as a stealth IRA) that you can use for co-pays and deductions. A High Deductible Health Plan combined with an HSA isn’t the right move for everyone, but for the healthy, you can save a lot of money on your premiums and taxes.

#4 Business Expenses

Many self-employed doctors miss out on all kinds of tax deductions simply because they don’t realize what is deductible and what isn’t. If you are a sole proprietor, partner, or contractor, you may need to keep careful records of your business expenses. That includes home office, travel, food, lodging, office equipment and supplies, medical equipment, CME costs, license fees, communication costs, board exam fees. . . the list goes on and on. The biggest advantage of being an owner, rather than an employee, is that you can get all these nice deductions. That’s offset by the need to pay the employer’s share of your payroll taxes, but at least those are deductible, too.

Employees often miss out on these deductions. Before 2018, it was possible to deduct at least some reimbursable operating expenses on Schedule A, but it was less than the 2% income floor, which for many doctors was much more than they spent. Now, you cannot deduct unpaid operating expenses at all. Therefore, it is better to get your employer to pay for it. The employer gets to pay them upfront tax, just like you would if you were self-employed.

For example, many employees have a CME fund. You can also, of course, just be the owner. Just because 95% of your income comes from your main job, where you work, that doesn’t mean you can’t moonlight on the side and get all the deductions a contractor can. If a moonlighting job requires a medical license, DEA license, CME, etc., you can deduct your business expenses from that income. Technically, you should only pull evenly.

Your business does not even have to be related to medicine. When I wrote this post in 2012, the income from this blog was not taxed at all because I deducted office supplies, internet, and telephone expenses. This type of business has changed the lives of many doctors, allowing them to claim tax deductions and, more importantly, helping them gain income. Every little bit helps.

#5 Mortgage Interest

Many doctors find themselves with a lot of debt—including consumer loans, car loans, credit card loans, student loans, home loans, investment loans, and mortgages. While I generally advocate avoiding most of these loans and/or paying off as soon as possible the ones you do take out, the IRS is making mortgages tax-deductible (and PMI payments are now tax-deductible). If you have a loan, you can also convert it to a low-cost tax-deductible loan. Unfortunately, mortgages and HELOC interest are not nearly as valuable as they used to be.

The standard deduction is high (so few people deduct it at all), and these days, you can’t deduct interest from a mortgage or HELOC taken out to pay for anything other than the house and its improvements. But in 2025, the One Big Beautiful Bill Act (OBBBA) increases the SALT (state and local tax deduction) from $10,000 to $40,000, and in theory, that means more people will file their 2025 taxes.

#6 Love

Doctors are often people who help people. If they don’t give money, they often give time. Any donations to an eligible charity are tax-deductible, as is interest on a mortgage (assuming you have enough savings to make ends meet), or you can donate larger items like an old boat. You can also calculate the miles used to drive to and from the organization of your choice and any other costs associated with donating your time (although you won’t be able to deduct the value of your time itself).

More info here:

20 Ways to Lower Your Taxable Income for High Earners

#7 Tax-Loss Harvest

Investors hate losing money. But in a taxable account, Uncle Sam will share your pain. You can get a break on your taxes without having to “sell short” by doing tax loss harvesting. You sell a losing investment, and buy one that is closely related to the one you just sold. For example, you could sell the Vanguard Total Stock Market Index Fund and buy the Vanguard 500 Index Fund. These two funds tend to move in lockstep, but they are separate investments. You can deduct up to $3,000 a year of investment losses against your ordinary income.

What other tax deductions are you using to lower your debt? Do you think incurring these expenses is worth your time, or would you rather take the standard deduction?

[This updated post was originally published in 2012.]