Doctor Tax Strategies: 7 Ways Physicians Can Reduce Taxes in 2026

Published: January 24, 2026 | Category: Personal Finance | Reading Time: 14 minutes

Key Takeaways

Potential Savings: $30,000-$100,000+ annually in tax reduction
Top Strategy: Maximize all tax-advantaged retirement accounts
Tax Bracket: Most physicians are in the 32-37% federal bracket
Planning Timing: Start tax planning in January, not December
Key Accounts: 401(k), HSA, Backdoor Roth, Mega Backdoor Roth

Why Physicians Need Advanced Tax Strategies

High-income physicians face some of the highest tax burdens in America. A cardiologist earning $500,000 or an orthopedic surgeon earning $700,000 can easily pay $150,000-$250,000 or more in combined federal and state taxes.

2026 Federal Tax Brackets (Married Filing Jointly)

Taxable Income	Tax Rate
$0 - $23,850	10%
$23,850 - $96,950	12%
$96,950 - $206,700	22%
$206,700 - $394,600	24%
$394,600 - $501,050	32%
$501,050 - $751,600	35%
Over $751,600	37%

For a physician in the 35% bracket, every $10,000 in tax deductions saves $3,500 in federal taxes—plus state taxes.

Strategy 1: Maximize Retirement Account Contributions

The most powerful tax strategy for physicians is maximizing contributions to tax-advantaged retirement accounts.

2026 Contribution Limits

Account Type	2026 Limit (Under 50)	2026 Limit (50+)
401(k) / 403(b) Employee Deferral	$23,000	$30,500
Total 401(k) (including employer)	$69,000	$76,500
Traditional/Roth IRA	$7,000	$8,000
SEP-IRA (Self-Employed)	Up to $69,000	Up to $69,000
Solo 401(k) (Self-Employed)	Up to $69,000	Up to $76,500

Tax Savings Example

A gastroenterologist earning $550,000 who maxes out their 401(k) at $23,000:

Federal tax savings (35% bracket): $8,050
State tax savings (5% average): $1,150
Total annual savings: $9,200
Over 25 years: $230,000 in direct tax savings (plus tax-deferred growth)

Action Items

Set 401(k) contributions to max out by year-end
Verify employer matching and maximize it
Consider pre-tax vs. Roth 401(k) based on current vs. expected future tax rates

Strategy 2: Utilize Health Savings Accounts (HSA)

The HSA is the only "triple tax-advantaged" account available—and most physicians underutilize it.

HSA Tax Benefits

Tax-deductible contributions: Reduces taxable income
Tax-free growth: Investments grow without taxation
Tax-free withdrawals: For qualified medical expenses

2026 HSA Contribution Limits

Individual coverage: $4,150
Family coverage: $8,300
Catch-up (55+): Additional $1,000

Advanced HSA Strategy

Instead of using your HSA for current medical expenses, pay out-of-pocket and let your HSA grow tax-free. After decades, withdraw funds tax-free to reimburse yourself for those past expenses. This creates a stealth Roth IRA with no income limits.

HSA Eligibility Requirement

You must have a High Deductible Health Plan (HDHP). 2026 minimums: $1,600 individual deductible / $3,200 family deductible.

Strategy 3: Execute Backdoor and Mega Backdoor Roth Conversions

High-income physicians are excluded from direct Roth IRA contributions, but the Backdoor Roth provides a legal workaround.

Backdoor Roth IRA

Contribute $7,000 to a Traditional IRA, then convert to Roth IRA. While there's no upfront tax deduction, you get tax-free growth forever. Learn the step-by-step process in our Backdoor Roth IRA Guide.

Mega Backdoor Roth

If your 401(k) allows after-tax contributions and in-service distributions, you can contribute up to $46,000 additional after-tax dollars and convert them to Roth. This supercharges your tax-free retirement savings. See our complete Mega Backdoor Roth Guide.

Combined Potential

A physician maximizing all Roth strategies could shelter:

Backdoor Roth IRA: $7,000
Spouse Backdoor Roth IRA: $7,000
Mega Backdoor Roth: $46,000
Spouse Mega Backdoor (if available): $46,000
Total: Up to $106,000 annually into tax-free Roth accounts

📉

Physician Tax Strategy Flowchart

Visual decision tree showing which tax strategies to prioritize based on income, employment type, and financial goals

Strategy 4: Leverage Real Estate Tax Benefits

Real estate offers unique tax advantages that savvy physicians use to reduce their tax burden.

Depreciation

Residential rental property can be depreciated over 27.5 years, creating paper losses that offset rental income and sometimes other income.

Real Estate Professional Status

If a physician's spouse qualifies as a "Real Estate Professional" (750+ hours annually in real estate activities), real estate losses can offset the physician's W-2 income—potentially saving tens of thousands in taxes.

Cost Segregation

A cost segregation study accelerates depreciation on commercial properties, front-loading tax deductions.

1031 Exchanges

Sell investment property and defer all capital gains by purchasing another "like-kind" property within specific timeframes.

Real Estate Syndications

Many physicians invest passively in real estate syndications that provide K-1 losses from depreciation, offsetting passive income.

Strategy 5: Harvest Tax Losses

Tax-loss harvesting is selling investments at a loss to offset gains elsewhere in your portfolio.

How It Works

Identify investments that have declined in value
Sell them to realize the loss
Use the loss to offset capital gains
If losses exceed gains, deduct up to $3,000 against ordinary income
Carry forward excess losses to future years

The Wash Sale Rule

You cannot repurchase "substantially identical" securities within 30 days before or after the sale. To maintain market exposure, purchase a similar but not identical investment (e.g., sell S&P 500 index fund, buy total stock market fund).

Tax Savings Example

A radiologist with $50,000 in capital gains and $30,000 in unrealized losses:

Harvest $30,000 in losses
Offset $30,000 of gains
Pay long-term capital gains tax on only $20,000 instead of $50,000
At 15% LTCG rate: $4,500 in tax savings

Strategy 6: Optimize Business Structure (1099 Income)

Many physicians have 1099 income from moonlighting, locum tenens, expert witness work, or consulting. Proper business structure can significantly reduce taxes.

S-Corporation Election

If you have significant 1099 income ($50,000+), electing S-Corp status can reduce self-employment taxes:

Without S-Corp: Pay 15.3% self-employment tax on all profits
With S-Corp: Pay yourself a "reasonable salary" (subject to payroll taxes), take remaining profits as distributions (no self-employment tax)

Example

A emergency medicine physician with $100,000 in locum tenens income:

Without S-Corp: ~$15,300 in self-employment taxes
With S-Corp ($60K salary): ~$9,180 in payroll taxes
Savings: ~$6,000 annually

Solo 401(k) for Self-Employment Income

With 1099 income, you can establish a Solo 401(k) and contribute:

Employee deferral: $23,000 (shared with any W-2 401k)
Employer contribution: 25% of net self-employment income
Potential: Up to $69,000 in additional retirement savings

Qualified Business Income (QBI) Deduction

The 20% QBI deduction on pass-through income phases out at high incomes for physicians as a "specified service business." However, proper planning with an accountant may help capture some deduction.

Strategy 7: Use Donor-Advised Funds for Charitable Giving

A Donor-Advised Fund (DAF) supercharges your charitable giving tax benefits.

How DAFs Work

Contribute cash or appreciated securities to the DAF
Receive immediate tax deduction for the full fair market value
Investments grow tax-free in the DAF
Grant money to charities on your timeline

Key Benefits

Avoid capital gains: Donate appreciated stock instead of selling (no capital gains tax)
Bunch deductions: Make several years of donations in one year to exceed standard deduction
Simplify giving: One receipt for tax purposes regardless of how many charities you support

Bunching Strategy Example

A anesthesiologist who donates $10,000 annually to charity:

Annual giving: May not exceed standard deduction, limiting tax benefit
Bunched giving: Contribute $50,000 to DAF in one year, itemize and get full deduction, then distribute $10,000/year to charities

DAF Providers

Popular options include Fidelity Charitable, Schwab Charitable, and Vanguard Charitable—all with low minimums and no ongoing fees.

Bonus Strategy: State Tax Planning

If you have flexibility in where you practice, state taxes matter significantly:

No Income Tax States

Alaska, Florida, Nevada, New Hampshire (dividends/interest only), South Dakota, Tennessee (dividends/interest only), Texas, Washington, Wyoming

Tax Savings Example

A orthopedic surgeon earning $700,000:

California (13.3% top rate): ~$65,000+ in state taxes
Texas (0%): $0 in state taxes
Annual difference: $65,000+

Compare physician salaries by state to evaluate total after-tax compensation:

Tax Strategy Timeline

January-March

Review prior year taxes and identify improvement opportunities
Set up/adjust retirement contribution elections
Execute Backdoor Roth IRA contributions

April-June

File taxes or extension
Review Q1 estimated payments
Mid-year tax projection

July-September

Tax-loss harvesting review
Charitable giving planning
Verify retirement contributions on track

October-December

Final tax-loss harvesting
Charitable contributions (DAF contributions by Dec 31)
Verify all retirement accounts maxed
Year-end tax planning meeting with CPA

Tax Strategy Action Items for 2026

Max retirement accounts: 401(k), HSA, Backdoor Roth, Mega Backdoor Roth
Review 1099 income: Consider S-Corp election if significant
Evaluate real estate: Explore passive investments with tax benefits
Set up DAF: For charitable giving optimization
Schedule CPA meeting: Year-end planning session
Track basis: Document cost basis for all investments

Understanding your income is the first step to tax optimization:

Disclaimer: This article is for informational purposes only and does not constitute tax advice. Tax laws are complex and change frequently. Consult with a qualified tax professional before implementing any tax strategies.

Doctor Tax Strategies: 7 Ways Physicians Can Reduce Taxes in 2026

Published: January 24, 2026 | Category: Personal Finance | Reading Time: 14 minutes

Key Takeaways

Potential Savings: $30,000-$100,000+ annually in tax reduction
Top Strategy: Maximize all tax-advantaged retirement accounts
Tax Bracket: Most physicians are in the 32-37% federal bracket
Planning Timing: Start tax planning in January, not December
Key Accounts: 401(k), HSA, Backdoor Roth, Mega Backdoor Roth

Why Physicians Need Advanced Tax Strategies

2026 Federal Tax Brackets (Married Filing Jointly)

Taxable Income	Tax Rate
$0 - $23,850	10%
$23,850 - $96,950	12%
$96,950 - $206,700	22%
$206,700 - $394,600	24%
$394,600 - $501,050	32%
$501,050 - $751,600	35%
Over $751,600	37%

For a physician in the 35% bracket, every $10,000 in tax deductions saves $3,500 in federal taxes—plus state taxes.

Strategy 1: Maximize Retirement Account Contributions

The most powerful tax strategy for physicians is maximizing contributions to tax-advantaged retirement accounts.

2026 Contribution Limits

Account Type	2026 Limit (Under 50)	2026 Limit (50+)
401(k) / 403(b) Employee Deferral	$23,000	$30,500
Total 401(k) (including employer)	$69,000	$76,500
Traditional/Roth IRA	$7,000	$8,000
SEP-IRA (Self-Employed)	Up to $69,000	Up to $69,000
Solo 401(k) (Self-Employed)	Up to $69,000	Up to $76,500

Tax Savings Example

A gastroenterologist earning $550,000 who maxes out their 401(k) at $23,000:

Federal tax savings (35% bracket): $8,050
State tax savings (5% average): $1,150
Total annual savings: $9,200
Over 25 years: $230,000 in direct tax savings (plus tax-deferred growth)

Action Items

Set 401(k) contributions to max out by year-end
Verify employer matching and maximize it
Consider pre-tax vs. Roth 401(k) based on current vs. expected future tax rates

Strategy 2: Utilize Health Savings Accounts (HSA)

The HSA is the only "triple tax-advantaged" account available—and most physicians underutilize it.

HSA Tax Benefits

Tax-deductible contributions: Reduces taxable income
Tax-free growth: Investments grow without taxation
Tax-free withdrawals: For qualified medical expenses

2026 HSA Contribution Limits

Individual coverage: $4,150
Family coverage: $8,300
Catch-up (55+): Additional $1,000

Advanced HSA Strategy

HSA Eligibility Requirement

You must have a High Deductible Health Plan (HDHP). 2026 minimums: $1,600 individual deductible / $3,200 family deductible.

Strategy 3: Execute Backdoor and Mega Backdoor Roth Conversions

High-income physicians are excluded from direct Roth IRA contributions, but the Backdoor Roth provides a legal workaround.

Backdoor Roth IRA

Mega Backdoor Roth

Combined Potential

A physician maximizing all Roth strategies could shelter:

Backdoor Roth IRA: $7,000
Spouse Backdoor Roth IRA: $7,000
Mega Backdoor Roth: $46,000
Spouse Mega Backdoor (if available): $46,000
Total: Up to $106,000 annually into tax-free Roth accounts

📉

Physician Tax Strategy Flowchart

Visual decision tree showing which tax strategies to prioritize based on income, employment type, and financial goals

Strategy 4: Leverage Real Estate Tax Benefits

Real estate offers unique tax advantages that savvy physicians use to reduce their tax burden.

Depreciation

Residential rental property can be depreciated over 27.5 years, creating paper losses that offset rental income and sometimes other income.

Real Estate Professional Status

Cost Segregation

A cost segregation study accelerates depreciation on commercial properties, front-loading tax deductions.

1031 Exchanges

Sell investment property and defer all capital gains by purchasing another "like-kind" property within specific timeframes.

Real Estate Syndications

Many physicians invest passively in real estate syndications that provide K-1 losses from depreciation, offsetting passive income.

Strategy 5: Harvest Tax Losses

Tax-loss harvesting is selling investments at a loss to offset gains elsewhere in your portfolio.

How It Works

Identify investments that have declined in value
Sell them to realize the loss
Use the loss to offset capital gains
If losses exceed gains, deduct up to $3,000 against ordinary income
Carry forward excess losses to future years

The Wash Sale Rule

Tax Savings Example

A radiologist with $50,000 in capital gains and $30,000 in unrealized losses:

Harvest $30,000 in losses
Offset $30,000 of gains
Pay long-term capital gains tax on only $20,000 instead of $50,000
At 15% LTCG rate: $4,500 in tax savings

Strategy 6: Optimize Business Structure (1099 Income)

Many physicians have 1099 income from moonlighting, locum tenens, expert witness work, or consulting. Proper business structure can significantly reduce taxes.

S-Corporation Election

If you have significant 1099 income ($50,000+), electing S-Corp status can reduce self-employment taxes:

Without S-Corp: Pay 15.3% self-employment tax on all profits
With S-Corp: Pay yourself a "reasonable salary" (subject to payroll taxes), take remaining profits as distributions (no self-employment tax)

Example

A emergency medicine physician with $100,000 in locum tenens income:

Without S-Corp: ~$15,300 in self-employment taxes
With S-Corp ($60K salary): ~$9,180 in payroll taxes
Savings: ~$6,000 annually

Solo 401(k) for Self-Employment Income

With 1099 income, you can establish a Solo 401(k) and contribute:

Employee deferral: $23,000 (shared with any W-2 401k)
Employer contribution: 25% of net self-employment income
Potential: Up to $69,000 in additional retirement savings

Qualified Business Income (QBI) Deduction

The 20% QBI deduction on pass-through income phases out at high incomes for physicians as a "specified service business." However, proper planning with an accountant may help capture some deduction.

Strategy 7: Use Donor-Advised Funds for Charitable Giving

A Donor-Advised Fund (DAF) supercharges your charitable giving tax benefits.

How DAFs Work

Contribute cash or appreciated securities to the DAF
Receive immediate tax deduction for the full fair market value
Investments grow tax-free in the DAF
Grant money to charities on your timeline

Key Benefits

Avoid capital gains: Donate appreciated stock instead of selling (no capital gains tax)
Bunch deductions: Make several years of donations in one year to exceed standard deduction
Simplify giving: One receipt for tax purposes regardless of how many charities you support

Bunching Strategy Example

A anesthesiologist who donates $10,000 annually to charity:

Annual giving: May not exceed standard deduction, limiting tax benefit
Bunched giving: Contribute $50,000 to DAF in one year, itemize and get full deduction, then distribute $10,000/year to charities

DAF Providers

Popular options include Fidelity Charitable, Schwab Charitable, and Vanguard Charitable—all with low minimums and no ongoing fees.

Bonus Strategy: State Tax Planning

If you have flexibility in where you practice, state taxes matter significantly:

No Income Tax States

Alaska, Florida, Nevada, New Hampshire (dividends/interest only), South Dakota, Tennessee (dividends/interest only), Texas, Washington, Wyoming

Tax Savings Example

A orthopedic surgeon earning $700,000:

California (13.3% top rate): ~$65,000+ in state taxes
Texas (0%): $0 in state taxes
Annual difference: $65,000+

Compare physician salaries by state to evaluate total after-tax compensation:

Tax Strategy Timeline

January-March

Review prior year taxes and identify improvement opportunities
Set up/adjust retirement contribution elections
Execute Backdoor Roth IRA contributions

April-June

File taxes or extension
Review Q1 estimated payments
Mid-year tax projection

July-September

Tax-loss harvesting review
Charitable giving planning
Verify retirement contributions on track

October-December

Final tax-loss harvesting
Charitable contributions (DAF contributions by Dec 31)
Verify all retirement accounts maxed
Year-end tax planning meeting with CPA

Tax Strategy Action Items for 2026

Max retirement accounts: 401(k), HSA, Backdoor Roth, Mega Backdoor Roth
Review 1099 income: Consider S-Corp election if significant
Evaluate real estate: Explore passive investments with tax benefits
Set up DAF: For charitable giving optimization
Schedule CPA meeting: Year-end planning session
Track basis: Document cost basis for all investments

Understanding your income is the first step to tax optimization: