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    Dr. Marcinko is originally from Loyola University MD, Temple University in Philadelphia and the Milton S. Hershey Medical Center in PA; as well as Oglethorpe University and Emory University in Georgia, the Atlanta Hospital & Medical Center; Kellogg-Keller Graduate School of Business and Management in Chicago, and the Aachen City University Hospital, Koln-Germany. He became one of the most innovative global thought leaders in medical business entrepreneurship today by leveraging and adding value with strategies to grow revenues and EBITDA while reducing non-essential expenditures and improving dated operational in-efficiencies.

    Professor David Marcinko was a board certified surgical fellow, hospital medical staff President, public and population health advocate, and Chief Executive & Education Officer with more than 425 published papers; 5,150 op-ed pieces and over 135+ domestic / international presentations to his credit; including the top ten [10] biggest drug, DME and pharmaceutical companies and financial services firms in the nation. He is also a best-selling Amazon author with 30 published academic text books in four languages [National Institute of Health, Library of Congress and Library of Medicine].

    Dr. David E. Marcinko is past Editor-in-Chief of the prestigious “Journal of Health Care Finance”, and a former Certified Financial Planner® who was named “Health Economist of the Year” in 2010. He is a Federal and State court approved expert witness featured in hundreds of peer reviewed medical, business, economics trade journals and publications [AMA, ADA, APMA, AAOS, Physicians Practice, Investment Advisor, Physician’s Money Digest and MD News] etc.

    Later, Dr. Marcinko was a vital recruited BOD member of several innovative companies like Physicians Nexus, First Global Financial Advisors and the Physician Services Group Inc; as well as mentor and coach for Deloitte-Touche and other start-up firms in Silicon Valley, CA.

    As a state licensed life, P&C and health insurance agent; and dual SEC registered investment advisor and representative, Marcinko was Founding Dean of the fiduciary and niche focused CERTIFIED MEDICAL PLANNER® chartered professional designation education program; as well as Chief Editor of the three print format HEALTH DICTIONARY SERIES® and online Wiki Project.

    Dr. David E. Marcinko’s professional memberships included: ASHE, AHIMA, ACHE, ACME, ACPE, MGMA, FMMA, FPA and HIMSS. He was a MSFT Beta tester, Google Scholar, “H” Index favorite and one of LinkedIn’s “Top Cited Voices”.

    Marcinko is “ex-officio” and R&D Scholar-on-Sabbatical for iMBA, Inc. who was recently appointed to the MedBlob® [military encrypted medical data warehouse and health information exchange] Advisory Board.

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How You Can Deduct Your Medical Expenses

Reduce Taxes, Bunch Deductions

By Rick Kahler MSFS CFP®

***

Want to save a bunch under the new federal income tax laws? Try bunching your deductions.

The new tax law doubles the standard deduction and eliminates most miscellaneous deductions. It takes a lot more of the limited allowable deductions left to reach the threshold for itemizing deductions instead of using the standard amount.

This means fewer Americans will be able to itemize. A Jan 18, 2018 post by Dena Bunis at AARP.com quotes Mark Mazur, director of the nonpartisan Tax Policy Center: “We’ve estimated that about 30 percent itemized in 2017, and we think that’s going to go down to about the 10 percent range going forward.”

By “bunching” donations and tax payments into alternating years, you may still be able to itemize your deductions every other year. The three main deductions you may be able to bunch are property and state income taxes (up to a cap of $10,000), charitable donations, and medical expenses.

Example:

Here’s how bunching works for a single person. Let’s assume you have $11,500 of deductions every year. This will not put you over the $12,000 threshold, so you will take the $12,000 standard deduction every year. However, if you can bunch all those deductions into alternate years, you could deduct $23,000 one year and take the standard deduction the next year. Depending on your top income tax bracket, bunching might save you a tidy $1,100 to $4,070 every other year. (If you are married, just double these numbers.)

One of the easiest expenses to bunch in South Dakota is property taxes. Most property owners pay the first half of the prior year’s taxes in April and the second half in October. However, county treasurers will allow you to pay your taxes in full on January 1 of each year. So, every other year you write a check to the county treasurer on December 31, bunching two years of property taxes into one year.

Charitable donations can also be easily bunched. You might simply double your donations one year and skip them the next (let smaller charities that rely on your contributions know you’re doing this). Or you could use a donor advised fund (DAF). These funds allow you to make sizeable charitable donations without even knowing which charities you want to support or when. The fund managers keep your money invested until you direct them when and to whom to disburse it. If you give $6,000 a year to your church, for example, you could bunch two or more years of giving into one year and then have the DAF release the funds annually.

Medical deductions in excess of a percentage of your income (7.5% in 2018; 10% in 2019 and after) can be deducted if you itemize. Bunching elective procedures and other expenses into one year may put you over the threshold every other year.

AARP says that you may be surprised at some of the medical costs that are deductible. Those that are eligible include:

·         Out-of-pocket payments for prescription drugs and fees to doctors, dentists, chiropractors, psychiatrists, psychologists, podiatrists, physical or occupational therapists

·         Health and long-term care insurance premiums

·         Payments to nursing homes and other long-term care facilities

·         Inpatient alcohol and drug treatment programs

·         Modifications made to your home for medical reasons

·         Transportation to and from medical appointments

·         Dentures, prescription eyeglasses, hearing aids, and DME such as wheelchairs

·         Smoking-cessation and weight-loss programs related to a specific disease.

Assessment

Obviously, the potential for tax savings from bunching deductions will vary considerably. You may want to investigate what impact it could have for you. At least on alternate years, the savings might make you a happier taxpayer.

Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.

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Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

The Home Office Tax Deduction Explained

What it is – How it works?

By Dr. David Edward Marcinko MBA CMP™
http://www.CertifiedMedicalPlanner.org

A taxpayer’s business use of his or her home may give rise to a deduction for the business portion of expenses related to operating the home.

The basic requirement:

1. There must be a specific room or area that is set aside for and used exclusively on a regular basis as:
a. The principal place of any business, or
b. A place where the taxpayer meets with patients, clients or customers in the normal course of their trade or business, or
c. A separate structure that is used in the taxpayer’s trade or business and is not attached to their house or residence.

2. An employee can take a home office deduction if he or she meets the regular and exclusive use test and the use is for the convenience of the employer.

Deductions

Deductible expenses include business portions of mortgage interest, property taxes, depreciation, repairs and maintenance to the overall home that help the business use area, janitorial services or maid, utilities, insurance as well as other expenses directly related to the operating the remainder of the home.

***

https://www.amazon.com/Comprehensive-Financial-Planning-Strategies-Advisors/dp/1482240289/ref=sr_1_1?ie=UTF8&qid=1418580820&sr=8-1&keywords=david+marcinko

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.

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Subscribe: MEDICAL EXECUTIVE POST for curated news, essays, opinions and analysis from the public health, economics, finance, marketing, IT, business and policy management ecosystem.

***

More on Recent Interest Rate Hikes

Impending IRs and … the Economy

By http://www.MCOL.com

***

***

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

***

Update on the FOMC and Interest Rates

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What if the Fed DOESN’T Raise Rates?

Michael-Gayed-sepia

 

 

 

 

 By Michael A. Gayed CFA

***

With odds high for the Federal Reserve’s first rate hike in nearly a decade, and seemingly everyone predicting that rising rates are coming in the next few weeks, why in the world is the yield curve not steepening aggressively?

Something curious is happening

There is a mistaken notion out there that if the Fed raises rates, the cost of capital on everything is going to rise.  This is far too simplistic a way of viewing the bond market.  If the Fed raises rates and the market perceives it as being too early, then longer duration bond yields likely would actually fall and credit spreads likely would widen.  In other words, some rates could fall because the Fed is raising short rates.

***

gv

***

In a healthy environment, Fed hiking would coincide with a steepening yield curve, as growth and inflation expectations become more aggressively priced in. As of late, it seems as though the bond market vastly disagree with the Fed’s December timing.

Of course all this could change, as probabilities continuously change

So, if the Fed decides not to raise rates, and the yield curve continues to flatten, then something very serious may be underway in terms of 2016 economic expectations.  It does seem plausible that from a cycle perspective, the era for passive buy and hold investing in large-cap stocks is nearing its end, allowing for more active alpha opportunities to present themselves.

This would likely translate into more volatility in equities, which we believe our alternative Morningstar 4 Star overall rated ATAC Inflation Rotation Fund (Ticker: ATACX, rating as of 9/30/15 among 234 Tactical Allocation Funds derived from a weighted average of the fund’s 3-year risk-adjusted return measures) is distinctly qualified to handle given our focus on being defensive in Treasuries at the right time.

Having said that, despite my own personal believe the Fed will raise rates, it is concerning to see how longer duration bonds are behaving.

The key needs to be a comeback in commodities and emerging market stocks

For the yield curve in the United States to steepen, and for the Federal Reserve to “get it right,” likely a surprise recovery is needed in cyclical growth sentiment.  Commodities and emerging markets are among the most sensitive areas of the investable landscape to that, so it stands to reason that their movement would show the whites of the eyes of that happening.  The issue however is that every time is looks like budding momentum is about to become more entrenched, that momentum quickly reverses and creates a false positive on rising growth expectations.

***

gears

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Recent manufacturing data confirms that not much has changed on the growth side of the equation.  So far, broader equities seem to not care given historically favorable December seasonality.  That doesn’t mean one should not be considering this in an overall asset allocation policy.

Complicating-The European Central Bank

In many ways, crushing the Euro through more stimulus has the same effect as Federal Reserve tightening precisely because a rising Dollar is a contractionary force to exports.  European stimulus is Fed tightening IF it results in a Dollar super-spike.  Should that occur, the Fed would be more likely that not to not raise rates and actually do another round of stimulus.

Assessment

Insane sounding?  Maybe.  But; so is an environment where no amount of money printing seems to be accelerating the economy.

ABOUT

The ATAC Rotation Mutual Funds are managed by Pension Partners, LLC, an independent registered investment advisor.  The strategies were developed by Co-Portfolio Managers Edward M. Dempsey, CFP® and Michael A. Gayed, CFA. The Funds rotate offensively or defensively based on historically proven leading indicators of volatility, with the goal of taking less risk at the right time.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

****

Year End MEGA Tax Planning “Tips” for Physicians

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For Medical Professionals … and Us All

[By PERRY D’ALESSIO CPA] http://www.dalecpa.com

A SPECIAL ME-P REPORT

perry-dalessio-cpaYear-end tax planning is especially challenging this year, for EVERYONE, because Congress has yet to act on a host of tax breaks that expired at the end of 2013. Some of these tax breaks may be retroactively reinstated and extended, but Congress may not decide the fate of these tax breaks until the very end of this year (and, possibly, not until next year).

For Individuals

These breaks include, for individuals: the option to deduct state and local sales and use taxes instead of state and local income taxes; the above-the-line-deduction for qualified higher education expenses; tax-free IRA distributions for charitable purposes by those age 70- 1/2 or older; and the exclusion for up-to-$2 million of mortgage debt forgiveness on a principal residence.

For Businesses

For businesses, tax breaks that expired at the end of last year and may be retroactively reinstated and extended include: 50% bonus first year depreciation for most new machinery, equipment and software; the $500,000 annual expensing limitation; the research tax credit; and the 15-year write-off for qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property.

Bigger Earners

Higher-income-earners, like some doctors, have unique concerns to address when mapping out year-end plans. They must be wary of the 3.8% surtax on certain unearned income and the additional 0.9% Medicare (hospital insurance, or HI) tax that applies to individuals receiving wages with respect to employment in excess of $200,000 ($250,000 for married couples filing jointly and $125,000 for married couples filing separately).

The surtax is 3.8% of the lesser of: (1) net investment income (NII), or (2) the excess of modified adjusted gross income (MAGI) over an un-indexed threshold amount ($250,000 for joint filers or surviving spouses, $125,000 for a married individual filing a separate return, and $200,000 in any other case). As year-end nears; a taxpayer’s approach to minimizing or eliminating the 3.8% surtax will depend on his estimated MAGI and net investment income (NII) for the year. Some taxpayers should consider ways to minimize (e.g., through deferral) additional NII for the balance of the year, others should try to see if they can reduce MAGI other than NII, and other individuals will need to consider ways to minimize both NII and other types of MAGI.

The additional Medicare tax may require year-end actions. Employers must withhold the additional Medicare tax from wages in excess of $200,000 regardless of filing status or other income. Self-employed persons must take it into account in figuring estimated tax. There could be situations where an employee may need to have more withheld toward year end to cover the tax.

For example, an individual earns $200,000 from one employer during the first half of the year and a like amount from another employer during the balance of the year. He would owe the additional Medicare tax, but there would be no withholding by either employer for the additional Medicare tax since wages from each employer don’t exceed $200,000.

Also, in determining whether they may need to make adjustments to avoid a penalty for underpayment of estimated tax, individuals also should be mindful that the additional Medicare tax may be over-withheld. This could occur, for example, where only one of two married spouses works and reaches the threshold for the employer to withhold, but the couple’s income won’t be high enough to actually cause the tax to be owed.

The Checklist[s]

I’ve have compiled a checklist of additional actions, for ME-P readers, based on current tax rules that may help you save tax dollars if you act before year-end. Not all actions will apply in your particular situation, but you (or a family member) will likely benefit from many of them.

***

Next-Gen Physicians

[Future High Income-Earners?]

***

Year-End Tax Planning Moves for Individual Medical Providers 

Realize losses on stock while substantially preserving your investment position. There are several ways this can be done.

For example, you can sell the original holding, then buy back the same securities at least 31 days later. It may be advisable for us to meet to discuss year-end trades you should consider making.

Let’s consider the following:

  • Postpone income until 2015 and accelerate deductions into 2014 to lower your 2014 tax bill. This strategy may enable you to claim larger deductions, credits, and other tax breaks for 2014 that are phased out over varying levels of adjusted gross income (AGI). These include child tax credits, higher education tax credits, and deductions for student loan interest. Postponing income also is desirable for those taxpayers who anticipate being in a lower tax bracket next year due to changed financial circumstances. Note, however, that in some cases, it may pay to actually accelerate income into 2014. For example, this may be the case where a person’s marginal tax rate is much lower this year than it will be next year or where lower income in 2015 will result in a higher tax credit for an individual who plans to purchase health insurance on a health exchange and is eligible for a premium assistance credit.
  • If you believe a Roth IRA is better than a traditional IRA, and want to remain in the market for the long term, consider converting traditional-IRA money invested in beaten-down stocks (or mutual funds) into a Roth IRA if eligible to do so. Keep in mind, however, that such a conversion will increase your adjusted gross income for 2014. If you converted assets in a traditional IRA to a Roth IRA earlier in the year, the assets in the Roth IRA account may have declined in value, and if you leave things as is, you will wind up paying a higher tax than is necessary. You can back out of the transaction by re-characterizing the conversion, that is, by transferring the converted amount (plus earnings, or minus losses) from the Roth IRA back to a traditional IRA via a trustee-to-trustee transfer. You can later reconvert to a Roth IRA, if doing so proves advantageous.
  • It may be advantageous to try to arrange with your PHO, medical group, clinic, hospital or employer to defer a bonus that may be coming your way until 2015.
  • Consider using a credit card to pay deductible expenses before the end of the year. Doing so will increase your 2014 deductions even if you don’t pay your credit card bill until after the end of the year.
  • If you expect to owe state and local income taxes when you file your return next year, consider asking your employer to increase withholding of state and local taxes (or pay estimated tax payments of state and local taxes) before year-end to pull the deduction of those taxes into 2014 if doing so won’t create an alternative minimum tax (AMT) problem.
  • Take an eligible rollover distribution from a qualified retirement plan before the end of 2014 if you are facing a penalty for underpayment of estimated tax and having your employer increase your withholding isn’t viable or won’t sufficiently address the problem. Income tax will be withheld from the distribution and will be applied toward the taxes owed for 2014. You can then timely roll over the gross amount of the distribution, i.e., the net amount you received plus the amount of withheld tax, to a traditional IRA. No part of the distribution will be includible in income for 2014, but the withheld tax will be applied pro rata over the full 2014 tax year to reduce previous underpayments of estimated tax.
  • Estimate the effect of any year-end planning moves on the alternative minimum tax (AMT) for 2014, keeping in mind that many tax breaks allowed for purposes of calculating regular taxes are disallowed for AMT purposes. These include the deduction for state property taxes on your residence, state income taxes, miscellaneous itemized deductions, and personal exemption deductions. Other deductions, such as for medical expenses, are calculated in a more restrictive way for AMT purposes than for regular tax purposes in the case of a taxpayer who is over age 65 or whose spouse is over age 65 as of the close of the tax year. As a result, in some cases, deductions should not be accelerated.
  • You may be able to save taxes this year and next by applying a bunching strategy to “miscellaneous” itemized deductions (i.e., certain deductions that are allowed only to the extent they exceed 2% of adjusted gross income), medical expenses and other itemized deductions.
  • You may want to pay contested taxes to be able to deduct them this year while continuing to contest them next year.
  • You may want to settle an insurance or damage claim in order to maximize your casualty loss deduction this year.
  • Take required minimum distributions (RMDs) from your IRA or 401(k) plan (or other employer-sponsored retired plan) if you have reached age 70- 1/2. Failure to take a required withdrawal can result in a penalty of 50% of the amount of the RMD not withdrawn. If you turned age 70- 1/2 in 2014, you can delay the first required distribution to 2015, but if you do, you will have to take a double distribution in 2015-the amount required for 2014 plus the amount required for 2015. Think twice before delaying 2014 distributions to 2015-bunching income into 2015 might push you into a higher tax bracket or have a detrimental impact on various income tax deductions that are reduced at higher income levels. However, it could be beneficial to take both distributions in 2015 if you will be in a substantially lower bracket that year.
  • Increase the amount you set aside for next year in your employer’s health flexible spending account (FSA) if you set aside too little for this year.
  • If you are eligible to make health savings account (HSA) contributions in December of this year, you can make a full year’s worth of deductible HSA contributions for 2014. This is so even if you first became eligible on Dec. 1st, 2014.
  • Make gifts sheltered by the annual gift tax exclusion before the end of the year and thereby save gift and estate taxes. You can give $14,000 in 2014 to each of an unlimited number of individuals but you can’t carry over unused exclusions from one year to the next. The transfers also may save family income taxes where income-earning property is given to family members in lower income tax brackets who are not subject to the kiddie tax.

***

Target MD

[Future IRS Targets?]

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Year-End Tax-Planning Moves for Medical Practices & Physician Executives 

  • Medical practices, clinics and businesses should buy machinery and equipment before year end and, under the generally applicable “half-year convention,” thereby secure a half-year’s worth of depreciation deductions for the first ownership year.
  • Although the business property expensing option is greatly reduced in 2014 (unless legislation changes this option for 2014), don’t neglect to make expenditures that qualify for this option. For tax years beginning in 2014, the expensing limit is $25,000, and the investment-based reduction in the dollar limitation starts to take effect when property placed in service in the tax year exceeds $200,000.
  • Businesses may be able to take advantage of the “de minimis safe harbor election” (also known as the book-tax conformity election) to expense the costs of inexpensive assets and materials and supplies, assuming the costs don’t have to be capitalized under the Code Sec. 263A uniform capitalization (UNICAP) rules. To qualify for the election, the cost of a unit-of-property can’t exceed $5,000 if the taxpayer has an applicable financial statement (AFS; e.g., a certified audited financial statement along with an independent CPA’s report). If there’s no AFS, the cost of a unit of property can’t exceed $500. Where the UNICAP rules aren’t an issue, purchase such qualifying items before the end of 2014.
  • A corporation should consider accelerating income from 2015 to 2014 where doing so will prevent the corporation from moving into a higher bracket next year. Conversely, it should consider deferring income until 2015 where doing so will prevent the corporation from moving into a higher bracket this year.
  • A corporation should consider deferring income until next year if doing so will preserve the corporation’s qualification for the small corporation alternative minimum tax (AMT) exemption for 2014. Note that there is never a reason to accelerate income for purposes of the small corporation AMT exemption because if a corporation doesn’t qualify for the exemption for any given tax year, it will not qualify for the exemption for any later tax year.
  • A corporation (other than a “large” corporation) that anticipates a small net operating loss (NOL) for 2014 (and substantial net income in 2015) may find it worthwhile to accelerate just enough of its 2015 income (or to defer just enough of its 2014 deductions) to create a small amount of net income for 2014. This will permit the corporation to base its 2015 estimated tax installments on the relatively small amount of income shown on its 2014 return, rather than having to pay estimated taxes based on 100% of its much larger 2015 taxable income.
  • If your business qualifies for the domestic production activities deduction for its 2014 tax year, consider whether the 50%-of-W-2 wages limitation on that deduction applies. If it does, consider ways to increase 2014 W-2 income, e.g., by bonuses to owner-shareholders whose compensation is allocable to domestic production gross receipts. Note that the limitation applies to amounts paid with respect to employment in calendar year 2014, even if the business has a fiscal year.
  • To reduce 2014 taxable income, consider disposing of a passive activity in 2014 if doing so will allow you to deduct suspended passive activity losses. If you own an interest in a partnership or S corporation consider whether you need to increase your basis in the entity so you can deduct a loss from it for this year.

Assessment

These are just some of the year-end steps that you can take to save taxes. So, contact your CPA to tailor a particular plan that will work best for you. We also will need to stay in close touch in the event Congress revives expired tax breaks, to assure that you don’t miss out on any resuscitated tax saving opportunities.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Financial Planning MDs 2015

Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants

Income Tax Brackets and Rates for 2014

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An ME-P Update

[By Internal Revenue Service]

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Tax Brackets

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More:

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Financial Planning MDs 2015

TEXTBOOK

Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

 

Low Interest Rate Traps

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IRs at Historic Lows

[By David K. Luke MIM CMP™ http://www.NetWorthAdvice.com]

David K. LukeWhile our economy is still in a “Land of Make Believe”, despite the “mini-crash” today and with interest rates still at historic low levels, now is a good time to remind ourselves of a couple tempting financial missteps:

Taking On New Debt

Debt is Debt!

When you borrow money to buy that second home, nice boat, or remodel the kitchen, it is easier to justify considering the lower monthly payments at 3 to 6%. That $110,000 Sea Ray 300 Sundeck boat you have always wanted is only $729 a month (240 months @ 5% no down). Affordable, right?

Whether or not it easily fits within your budget is one thing, but the low interest rate does not negate the fact that you now have an $110,000 liability on your Balance Sheet. Depending on depreciation and resale factors, you may also be draining your net worth with such a purchase if you end up “upside down” on the value.

Neglecting Existing Debt

Your mortgage is under 3.5%. Your practice just scored a low interest rate on a needed new piece of medical equipment. Your local bank just quoted you 1.99% on a new car loan. Life is good for medical professionals!

Perhaps because the emotional benefits of paying off debt is difficult to quantify, paying off low interest rate loans is not usually a priority for most physicians. Professor Obvious states: “Once a debt is paid, you have freed yourself of future recurring interest costs and an outstanding obligation.” While this seems like a trite concept, the point is that funds that have been previously used to pay interest, no matter how low the rate was, can be used for other purposes. Unfortunately physicians and financial advisors, CPAs, estate planning attorneys tend to be over analytical and miss the “happiness factor” of getting out of debt and owning your abode and other assets. For the strictly number-oriented person or over analytical physician, this can be a sticking point. After all, why pay off a 3.5 % mortgage (that after tax is costing you around 2.5% or less)?

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Euro Debt

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A physician would never remortgage their home to invest in a mutual fund. In fact, it is now accepted by FINRA, the SEC, and other regulatory bodies in the financial services industry that a financial advisor that encourages a client to leverage principle residence equity (take out a 1st or 2nd mortgage) to make a security investment is akin to committing malpractice. Yet I hear the rationale that funds are being deployed to other “investments” rather than paying off a low interest rate mortgage.

Life Is Good!

From a financial planning perspective, avoiding new debt and retiring existing debt obligations as soon as reasonable gives a physician and his or her family more options. Taking a locum tenens position, retiring early, and working less hours are just a few of these options.

Assessment

With a little consideration and restraint on your personal debt situation, even at these low interest rates, financial freedom and the resulting empowerment is achievable earlier.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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