How Trump's Tax Plan Could Affect Doctors

Karen Riccio

Disclosures

November 10, 2017

In This Article

More Elements of the House-Proposed Tax Plan

Consolidated Income Brackets

Although the seven federal income tax brackets in place today would be reduced to four under the GOP plan, Dr Dahle said he sees the increase in the lower tier from 10% to 12% as most impactful.

  • 12% (on the first $45,000 of taxable income for individuals; $90,000 for married couples filing jointly)

  • 25% (starts at $45,000 for individuals; $90,000 for married couples filing jointly)

  • 35% (starts at $200,000 for individuals; $260,000 for married couples filing jointly)

  • 39.6% (starts at $500,000 for individuals; $1 million for married couples filing jointly)

"This could cause medical students and residents to pay significantly more tax. In reality, it'll raise taxes on all of us because (if we're married) $18K of our income is taxed at 10% currently. Now that'll be 12%. Of course, if some of what is now taxed at 15% becomes taxed at 12%, we could even come out ahead. It's hard to say without specifics," says Dr Dahle.

However, as most medical students earn very little and most residents earn just over $45,000, most likely this will not cost them significantly more in tax.

"Something that concerns me is what state and local governments might do after the tax bill is passed," says Dr Dahle. "Will these entities see the federal reduction as an opportunity to raise rates when they will least be felt by taxpayers, especially if SALT is axed? Will the feds pay for lower taxes by reducing federal grants to states? At the moment, your guess is as good as mine!"

While the tax reform bill is far from final, it's never too early to discuss with your CPA the potential changes and how they might affect you. Maybe it will make sense to change the structure of your business, or to find new ways to shelter more of your taxable income in retirement accounts.

Considering that the tax bill represents the most sweeping reform in decades, change is inevitable and preparation is key—unless this goes the way of failed healthcare reform.

Finally, from a physician's perspective, one key question remains: If this tax bill passes, how is the reduction in tax revenue financed? The Republicans say it will come from increased deficits until the tax cuts create increased revenue to tax. However, the concern is that cuts will come from Medicare spending.

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