High Income, High Taxes: Smart Tax Strategies for Physicians

Physicians often face a unique financial challenge: high incomes paired with equally high tax burdens. After years of training and hard work, it can feel discouraging to see a large portion of earnings lost to taxes. The good news? With the right strategy, physicians can protect more of what they earn, grow long-term wealth, and reduce financial stress. At AlphaTrust, our Total Financial Management approach helps physicians align their income, taxes, and investments for maximum efficiency.

Step 1: Maximize Retirement Contributions

Retirement accounts aren’t just for the future—they’re powerful tax shelters today.

Action Step: Contribute the maximum to 401(k)s, 403(b)s, IRAs, or SEP IRAs. If eligible, use catch-up contributions or consider a defined benefit plan to reduce taxable income while accelerating retirement savings.

Step 2: Explore Advanced Savings Tools

Physicians often phase out of traditional tax benefits due to high income, but there are alternatives.

Action Step: Consider backdoor Roth IRAs, Health Savings Accounts (HSAs), and 529 college savings plans. Each offers tax advantages tailored to long-term goals like healthcare and education.

Step 3: Leverage Tax-Efficient Investments

Not all investments are created equal when it comes to tax impact.

Action Step: Work with an advisor to allocate investments strategically—using taxable accounts for long-term capital gains and retirement accounts for high-turnover or income-generating assets. Tax-loss harvesting can further reduce taxable gains.

Step 4: Structure Income Wisely

How income is received can make a big difference in your tax bill.

Action Step: For physicians in private practice, evaluate whether an S-Corp election or partnership structure could reduce self-employment taxes. Review options for deferred compensation plans or profit-sharing arrangements with your practice.

Step 5: Don’t Overlook Deductions and Credits

Many physicians miss out on legitimate deductions simply because they’re too busy to plan ahead.

Action Step: Track eligible deductions like malpractice insurance, CME expenses, licensing fees, and charitable giving. A proactive CPA can help identify overlooked opportunities that add up to significant savings.

Taxes are inevitable—but overpaying doesn’t have to be. With the right planning, physicians can reduce their tax burden, grow wealth more efficiently, and enjoy the financial rewards of their hard work. At AlphaTrust, our Total Financial Management process helps physicians align taxes, investments, insurance, and estate planning into one clear strategy—so more of your income goes toward building the future you want.