#258 The Best Tax Strategies for High-Earning Physicians ft. Peter Kim, MD

Why Physicians Overpay in Taxes

Peter Kim opens the episode by addressing a truth many high-earning physicians might not realize—taxes are likely their largest expense. While many assume their mortgage or student loans take the biggest chunk of their income, taxes often outweigh them. The issue is not just that taxes are high, but that many physicians are unintentionally paying more than necessary simply due to a lack of financial education and proactive planning.

He points out that the tax code is actually written to encourage certain behaviors. It’s full of incentives designed to reward actions like investing in retirement, building businesses, or supporting charitable causes. The problem arises when physicians, who are deeply trained in medicine but not in finance, don’t know how to leverage those incentives. Too often, they depend on CPAs who focus only on filing returns, rather than guiding them with a tax strategy.

Peter explains it clearly: “The tax code is written as a series of incentives… If you don’t know how to use it to your advantage in many ways, you’re missing out.”

He reminds listeners that while they’ve spent years perfecting their clinical skills, almost none of that time is spent learning how to optimize their finances—including taxes.

Retirement Accounts and Real Estate Strategies

Peter moves into practical strategies by emphasizing the importance of maximizing tax-advantaged retirement accounts. Accounts like 401(k)s, 403(b)s, and backdoor Roth IRAs are among the simplest ways for physicians to reduce their taxable income. For those with side income, solo 401(k)s or SEP IRAs offer even more opportunities. He encourages listeners to take full advantage of these accounts, noting that every dollar contributed pre-tax lowers their tax bill.

He then turns to one of his favorite topics—real estate. Beyond generating passive income, real estate offers unique tax benefits, primarily through depreciation. This allows investors to claim losses that reduce their taxable income. However, Peter is careful to point out the distinction between passive and active income: passive losses can only offset passive gains unless the individual qualifies for real estate professional status (REPS).

In Peter’s words: “Passive losses offset passive income, and active losses offset active income. It’s important to know that there’s a distinction there.”

He explains that while REPS may not be attainable for full-time physicians, it’s possible for their spouses to qualify and unlock significant tax benefits.

Side Income and Business Structures

In this section, Peter explores how physicians can optimize taxes by structuring side income streams wisely. Whether it’s consulting, expert witness work, or telemedicine, these opportunities can be more than just extra cash—they can open the door to significant tax deductions. By forming an LLC or S-Corp, doctors can treat themselves as business owners and access a broader set of tax-saving tools.

These structures allow for deductions on common business expenses such as home office costs, professional development, and travel. Over time, these small deductions can add up and significantly lower one’s overall tax liability. Peter urges listeners to work with a tax professional to ensure these setups are done correctly and legally.

He puts it plainly: “You might be able to save on some self-employment taxes. You can deduct some standard business expenses like travel, home office, continuing education… All these little things do add up.”

His message is that these opportunities are available to many, but few take full advantage.

Smart Charitable Giving and Family Involvement

Peter transitions to a thoughtful discussion on charitable giving. Many physicians are naturally inclined to give back, and with the right approach, those charitable donations can also come with tax benefits. He introduces the donor-advised fund, which allows donors to contribute assets now, receive a tax deduction immediately, and decide later where the funds should go.

He also discusses “bunching” donations—consolidating several years’ worth of giving into a single year—to surpass the standard deduction and receive greater tax benefits. These tactics not only support worthy causes but also allow physicians to be strategic about when and how they give.

Peter also shares an often-overlooked opportunity: hiring your children through your business. If your children can help with administrative work, marketing, or even appear in social media campaigns, you can legally pay them and deduct those wages as a business expense.

“You can pay your children and set up retirement accounts for them… It can act as a deduction against your business,” Peter explains.

Taking Action + FREE Downloadable PDF Guide

Peter closes the episode by encouraging listeners to take action. Many doctors, he notes, are unknowingly giving away too much of their income. Even though taxes serve an important role, he emphasizes that there are legal, ethical strategies physicians can use to keep more of what they earn. But those strategies only work if doctors are proactive and surround themselves with the right experts.

He urges listeners to find a CPA who acts as a strategist, not just a tax preparer. If your accountant isn’t helping you think ahead or hasn’t scheduled a tax planning meeting, that’s a red flag. Peter also reiterates the power of implementing even just one or two strategies—each one can make a real difference in how much money stays in your pocket.

“You don’t have to implement all of these strategies at once,” he says. “But even just adopting one or two… can make a significant difference.”

He offers a FREE downloadable PDF checklist (linked in the show notes) to make it easier to get started without having to remember every detail from the episode.