Taxes Archives - Physician on FIRE

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Giving Faceoff: Charitable Remainder Trust (CRT) versus Donor Advised Fund (DAF)

I’ve written extensively about how I use a donor advised fund to give more generously while taking advantage of the ability to reduce your taxable income while working and living in a high tax bracket. Another vehicle that can accomplish the same thing in a different way is the charitable remainder trust (CRT). I knew a little about them but hadn’t explored the concept in much detail. I’ve been accused of being greedy because I park my donated dollars in the donor advised fund before dishing it out; I can’t imagine what the naysayers would say if I were using […]

Tax Loss Harvesting with Vanguard: A Step by Step Guide

When the stock market hiccups, as it is known to do from time to time, you may have one of several common reactions. What?!? I just lost 10% of my net worth. This is horrible! Meh. A 10% market correction happens in most years. It will bounce back. Eventually. Cool! Let’s see what I can tax loss harvest. The stock market is volatile, and it’s not unusual to see downward swings of 5% to 10% in a few days’ time. While seeing several years’ worth of spending erased from your balance sheet is less than awesome, you’re invested for […]

Tax-Free Roth Conversions via the Section 199A 20% QBI Deduction

Section 199A QBI 20% deduction

Today, I’ve got a guest post from one of our nation’s foremost experts on the 20% qualified business income deduction, also known as the Section 199A Deduction. CPA Stephen L Nelson explains what the deduction is and how it can be applied, while coming up with a novel use for the tax deduction, which can be as high as $63,000 for professionals if you’re married, filing jointly, and hit taxable income precisely at “peak deduction” at $315,000. I’ll let our guest author explain how this deduction can be used to make “tax-free” Roth conversions, potentially decreasing future RMDs and possibly […]

The Diminishing Returns of More Hard Work

summertime mullett lake

Today’s Saturday Selection comes from The White Coat Investor. Dr. Dahle was way ahead of me in thinking about the upside associated with working less. He published this piece way back in October of 2011 when his blog was less than six months old, and back when I was doing locum tenens work with an infant at home after our home hospital went bankrupt (but before the lawsuit). I wouldn’t discover his writing for another three-plus years, and it was only last year that I realized how great it would be to work less. Last month, I published a six-month […]

A Rare Tax Break for the Wealthy: The 529 Account

529 tax break

Welcome to another excellent Saturday Selection, a series in which a classic (but updated) post from a member of the WCI Network is shared with you. Today’s guest author is none other than the White Coat Investor himself. Since the original publication, tax reform has given 529 Plans a new use, since you can now withdraw up to $10,000 a year per beneficiary to pay for private and parochial K-12 school tuition. Our boys go to public schools, so we have no plans to use ours until college, but we’ve already funded the two 529 Plans generously, having crossed over […]

Tax Reform and Health Insurance: New Options for the Self-Employed & Early Retiree

catastrophic insurance

Before we get to today’s guest post, I want to highlight the impressive new course put together by my friend and business partner, Dr. Jim Dahle. It’s a thorough course designed to take you from an investing novice to a confident do-it-yourself investor with a sound written investing plan. I’ve personally taken portions of the course and yes, I’ve learned a few things already. But this course isn’t designed for me. The target market is the high-income professional who relies on someone else to manage his or her money without knowing whether or not it’s really being managed appropriately. By […]

WCI versus PoF: A Pro / Con on Donor Advised Funds

New Orleans 9th Ward New Home

Welcome to our first Pro / Con post, a collaboration between The White Coat Investor and me. This is going to be fun. The White Coat Investor a.k.a Dr. Jim Dahle and I have a lot in common. We are both physicians in a shift-work specialty. We’re the same age. We can consider ourselves to be financially independent in our early forties. We work less than full time and have kids in grade school. We’re both pretty tall thanks to our Scandinavian heritage. Even our names are similar. Another trait WCI and I share is our proclivity towards charitable giving. […]

Tax Reform! How Physicians and the Self-Employed are Affected

TCJA tax reform

All I wanted for Christmas was a tax break. Guess what I got? A tax break! With the passage of the tax reform bill, most (but certainly not all) Americans will be paying a lower percentage of their income in taxes for at least the next eight years. I don’t plan to discuss the societal pros, cons, or politics, but I would like to address the immediate ramifications as it applies to many high-income professionals like you and me. How Might You Be Affected by Tax Reform? Among the highlights from the perspective of this married, part-time anesthesiologist: […]

Tax Benefits of Donating to Charity

White Cats on Stairs

Today’s Saturday Selection, courtesy of the The White Coat Investor, explores two of my favorite things: lowering taxes and donating money. Of course, the two often go hand-in-hand. I’ve explored the donor advised fund, my favorite vehicle for giving, but there are other options that Dr. Jim Dahle explains in the post below. This post was originally published on The White Coat Investor. Did you know that 41% of charitable giving occurs in December? I like to think people are motivated by the season, but the fact that the tax year is coming to end probably has something to […]

A Quarter Million in DAFs: A Retirement Goal Achieved

This is not your typical FIRE blog, and I’m not an average FIRE blogger. Financial Independence was never a goal of mine; its presence in my life was a discovery. A few years ago, I learned of the concept, realized I already had enough to retire early, and have been grasping for good reasons not to retire ever since. I’ve got a good job. I don’t love every aspect of the work I do, but it’s not a job I’ve been desperate to escape from. I know there are a number of things I will miss when I leave my […]

Estimated Taxes and the Safe Harbor Rule

safe harbor

Today’s Saturday Selection from the White Coat Investor is another post geared towards the non-employed physician. In this case, by non-employed, I mean not a W-2 employee, but rather an independent contractor or practice partner earning money reported on a 1099. To be non-employed is better than being unemployed, unless you’re unemployed by choice, of course. In this post, you will learn everything you wanted to know about estimated taxes. Note that this applies not only to physicians and other high-income professionals, but also to self-employed individuals from all points of life. I’m looking at you, bloggers and entrepreneurs. As […]

The Best Way to Donate A Hundred Grand

Blue Door Kew Gardens

No, not the candy bar. In a related post, I shared how I woke up $100,000 poorer on my 41st birthday. This act of portfolio sabotage was self-inflicted; I greeted the news with a smile. The hundred grand is no longer mine, but I now have the opportunity now to use it to do some good in this world that my family and I live in. I’ve discussed why I choose to donate. Today’s post will describe how I use a donor advised fund to get the most for my donated dollars. The easiest way to donate to charity is to […]

Tax Drag: What a Drag it is Getting Taxed

Bayview Drive View

Most of us start making our first investments in tax-sheltered accounts. These accounts, which include traditional and Roth IRAs, 401(k) and similar employer-based retirement accounts, allow your investments to grow tax-free. Hopefully, we eventually reach a point in our lives where we have filled all available tax-sheltered space, and have money left over to invest. This is where a simple brokerage account, or taxable account comes into play. There are advantages to a “taxable” account, despite that ugly word. You can access the money at any time without penalty. Your investment choices are not limited as they are in an […]

Top 5 Ways to Pay No Tax on Capital Gains & Dividends

Today, I’d like to explore strategies to avoid taxes on capital gains and dividends. Both of these investment returns come in two flavors. Short-term capital gains and ordinary non-qualified dividends are taxed like income, so it’s awfully difficult to avoid taxes on those. Long-term capital gains (LTCG), realized when you sell an asset you’ve held for more than a year, and qualified dividends (QD) are a different variety. The tax treatment on them can be much more favorable. It can also be not so favorable. Typically, even though these taxes are generally lower than income tax, you can expect to […]

Top 5 Ways to Lower Your Tax Bill

Tax Day is just around the corner. Be sure to file your tax return (or file for an extension) before it’s too late! If you’re like me, this was taken care of weeks ago. If not, you (or your CPA) have some work to do. Have fun with that! Did you know that America’s retailers and restaurants now “celebrate” the date with weird deals, including free document shredding, $10.40 meals and bagel bundles, and free cookies? I’m a sucker for a good deal, and I’d never turn down a free cookie, but I won’t be out chasing deals on Tax […]

The Taxman Leaveth: Taxes in Early Retirement

Ice Fishing Thanksgiving

During our years of wealth accumulation, a.k.a. working, we pay a pretty penny in taxes. We become accustomed to knowing that after a certain point, we might only see about half of each additional dollar earned. Adding up federal & state income tax and property taxes, many physicians will have annual tax bills exceeding $100,000. If you’ve managed to accumulate a sizable nest egg over 20 years or less, you’ve no doubt contributed at least $1 million to the coffers of the taxman. Fear not. Much, much lower tax rates are on the horizon for the aspiring early retiree. Let’s […]

The Donor Advised Fund : A Smarter Way to Give

A donor advised fund (DAF) is an excellent and tax-efficient way to give to charity. The vast majority of my charitable giving is to and from my DAF. There are several big advantages to using a DAF as opposed to giving cold, hard cash, or writing checks. You get a tax deduction in the year that you donate to the fund that you control. You can give from the fund to charities of your choice years later. You can donate equities that have appreciated and nobody owes capital gains tax. Your donated money can remain invested in index funds. I […]