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SAN ANTONIO
MEDICINE

another $15,000 on December 31, 2023. This stacking strategy will 403(b) Plan ($20,500 for 2022 and $22,500 for 2023) for the 2022
allow the full gift to be claimed as an itemized deduction in 2023 which calendar year, the physician will only be taxed on $279,500 for 2022.
may reduce their taxable income. Deferrals and earnings on the deferrals are generally not taxable until
As the 2022 calendar year end approaches, another tax planning withdrawn from the plan.
strategy for physicians who do not want to donate cash is to consider Small physician groups can benefit by implementing a 401(k) plan.
donating appreciated securities instead. Donating appreciated securities A 401(k) plan works much like a 403(b) plan and permits pre-tax salary
has two major benefits. First, the amount of the charitable donation deferral contributions to the plan, subject to certain annual limitations.
will be the fair market value (FMV) of the security on the date of con- For self-employed physicians, a SEP-IRA allows for a pre-tax deferral
tribution. For example, stock purchased in 2017 for $100 may today of up to 25% of earnings not in excess of $61,000 for 2022. The catch
be worth $400 which is the FMV of the stock. A donation of the stock with a SEP-IRA is contributions must be made to the plan at the same
to a favorite charity will be eligible for a deduction of $400. rate for all eligible employees.
Another benefit to donating appreciated securities is the avoidance The benefit of implementing these types of retirement plans is a cur-
of taxable gain on its sale. Normally when a security is held over a year rent deduction for plan contributions and tax-deferred growth on plan
and sold for a gain, capital gains taxes are owed on the gain at a rate as investments.
high as 20%. If the charity subsequently sells the security, even for a
substantial gain, no capital gains taxes are owed. Tax Loss Harvesting
Tax loss harvesting is the practice of selling some underperforming
Mortgage Interest Deduction investments at a loss in order to offset gains realized on the sale of other
As mentioned above, the home mortgage interest deduction is one investments. Under IRS rules, taxes are only owed on the net gain re-
of the most common expenses that allows high-income taxpayers to alized, so offsetting investment gains with investment losses can reduce
itemize their deductions. Unfortunately, the TCJA decreased the avail- taxable income and create a tax savings for the physician.
able interest deduction to the first $750,000 of mortgage debt for a pri- Tax loss harvesting must be completed by the end of the calendar
mary home, down from $1,000,000 before the passage of the TCJA. year. Accordingly, in order to utilize this tax planning strategy for 2022,
The limitation on home mortgage interest applies to loans taken out the transactions must be completed by December 31, 2022.
or refinanced after December 15, 2017. Something to keep in mind when utilizing this strategy is the rules
For example, a physician who takes out a mortgage loan for $900,000 for tax loss harvesting preclude recognizing a loss on the disposition of
in 2017 can probably deduct all of the interest on the loan on his tax stock or securities when a substantially similar stock is purchased within
return. On the other hand, interest on the same mortgage taken out the 61-day period commencing 30 days before and ending 30 days after
in 2022 may be restricted by the TCJA and limited to interest on the the date of sale. In other words, a taxpayer cannot sell a stock at a loss
first $750,000 of principal value. to claim the tax benefit and repurchase the stock the next day at the
Refinanced mortgage loans are also subject to the limited interest lower price. Known as a “wash sale,” the IRS may disallow realization
deduction. With mortgage interest rates rising, the demand for refi- of the artificial tax loss and the taxpayer will be unable to utilize the re-
nancing loans may be less common but it is still a good strategy to check sulting tax break.
with a CPA prior to refinancing a home loan to avoid inadvertently los- These are just a few year-end tax planning steps that can be taken to
ing a portion of the interest deduction. save on taxes. We encourage physicians and other high-income taxpay-
In addition to the itemized deductions for charitable contributions ers to discuss these year-end tax planning strategies with their personal
and mortgage interest, physicians may further reduce their taxable in- tax advisors to determine what works best for them.
come by claiming the following personal deductions which are often
overlooked or underutilized: Jeffrey W. Bryson is an Attorney at Kreager Mitchell, PLLC
a BCMS Circle of Friends sponsor.
Retirement Plan Contributions
Pre-tax salary deferral contributions are a deduction that can often
be overlooked by physicians. Retirement plans for physicians em-
ployed by a hospital or medical group can include a 401(k), 403(b) or
457 plan and allow a physician avoid taxes on the compensation de-
ferred under the plan. For example, if a physician who earns $300,000
per year defers the maximum amount to an employer sponsored

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