4 Things Physicians Should Do Before Filing Tax Returns

It’s that time of year again. Your 2024 tax payments and returns are due on April 15, 2025.

Whether you’re working with a trusted tax preparer or planning to do your taxes yourself, getting familiar with your tax situation is essential. Here are some tips to keep in mind as we enter tax season.

If you have loans, check your eligibility for the student loan interest deduction

If you’re like most recent medical school graduates, you’ve paid thousands in student loan payments in 2024. Much of those payments, unfortunately, go toward interest. There’s one small silver lining: Up to $2,500 of student loan interest paid is deductible. The loans apply to undergraduate and graduate degree programs.

Most deductions are only available to those who itemize rather than take the standard deduction. When the available itemized deductions—mortgage interest, state and local taxes, and excess medical expenses, for example—exceed your standard deduction, you should itemize. But the student loan interest deduction is available to itemizers and standard deduction-takers alike. However, due to income limitations, it’s generally only available to residents and some early-career physicians. The deduction isn’t available to people who are married but filing separately.

The maximum deduction is $2,500 or the actual amount of student loan interest paid in 2024, whichever is less. That $2,500 figure is reduced proportionally when your income falls into what’s known as the phase-out range — between $165,000 and $195,000 (if you’re married and filing together), or between $80,000 and $95,000 (if you’re filing as single, head of household, or surviving spouse). If your income is above the top of your applicable range, you can’t claim the student loan interest deduction.

In this context, income is defined as your adjusted gross income (AGI, seen on Form 1040 line 11) before the student loan interest deduction and adjusted for certain foreign income exclusions.

Case study: Dr. Miranda, a first-year resident, receives a 2024 Form 1098-T from her student loan servicer stating that she paid $10,000 in interest on her loans. She’s a single filer with a modified AGI of $85,000. Because her modified AGI is within the phase-out range, her maximum deduction is reduced from $2,500 to $1,666 ($2,500 – $2,500 ✕ ($85,000 – $80,000) ÷ $15,000).

Check out IRS Publication 970 for more information.

Decide whether you’re filing jointly or separately

Married couples typically file their taxes together, but it’s worth pausing to consider if it might be beneficial to file your taxes separately from your spouse. Talk to your tax professional about filing separately if:

• You (and/or your spouse) are on an income-driven student loan repayment plan: Income-driven repayment (IDR) plans adjust your monthly payment based on your income. Depending on the IDR plan you’re on, your required monthly payment could skyrocket in a situation where your spouse earns significantly more than you.
• You (and/or your spouse) owe back taxes: It’s always best to file your taxes separately when one of you isn’t paid up with the IRS or state tax authorities.
• You (or your spouse) own a pass-through business: Many pass-through businesses — entities taxed as sole proprietorships, S corporations, or partnerships — qualify for the qualified business income (QBI) deduction. This slices up to 20% from a business’s taxable income. Due to the QBI’s income-based phase-out, which is even stricter for health-related businesses (generally any business providing medical services to patients), it’s sometimes advantageous to file separately.

Be aware: Filing separately can cause a loss of many other tax benefits, potentially negating any benefit. For example, if you file separately:

• Neither spouse can claim the student loan interest deduction or the child and dependent care tax credit.
• You both must agree on whether you are itemizing or taking the standard deduction. If one spouse itemizes, the other must, too, even if the other’s itemized deductions are $0.

Make your final 2024 HSA and IRA contributions

Even though Ryan Seacrest has already ushered us into 2025, you can still make 2024 health savings account (HSA) and individual retirement account (IRA) contributions. These additional contributions can potentially reduce your 2024 tax liability while helping you boost your retirement savings.

HSA contributions are tax-deductible, meaning they reduce your taxable income, regardless of your income level. Traditional IRA contributions might also be tax-deductible, but the deduction is limited or eliminated if your income exceeds set thresholds and you’re covered by an employer retirement plan, such as a 401(k) or 457(b) plan.

Roth IRA contributions aren’t tax-deductible, but they provide tax-free growth and withdrawals when certain requirements are met. Physicians with high incomes can’t directly contribute to Roth IRAs, but they can get around those rules with a backdoor Roth IRA — a four-step maneuver that allows you to skirt income-based Roth IRA contribution limitations.

The deadline for 2024 HSA and IRA contributions is the same as your original 2024 tax return due date: April 15, 2025. The 2024 contribution limit is $4,150 for HSAs and $7,000 for IRAs (or $8,000 if you’re at least 50 years old).

When making your final 2024 contribution, your HSA or IRA brokerage firm will ask you which tax year the contribution applies to. Make sure to select 2024.

Check for deadline postponements and disaster-related aid

Many communities in the United States were ravaged by historic natural disasters in 2024, from hurricanes that battered the Southeast to wildfires that claimed the homes of many Los Angeles County residents. To allow affected people to focus on more pressing matters, such as finding stable housing and rebuilding what they lost, the IRS and state tax authorities postponed tax payment and filing deadlines for some disaster victims.

It’s worth emphasizing that disaster-related tax relief typically involves postponing both your tax filing and your payment deadlines. Anyone can file for an automatic six-month tax filing extension, but you can’t push your tax payment due date without qualifying for disaster relief.

The IRS maintains a list of disasters whose victims qualify for tax relief. If you were affected by a natural disaster in 2024, check the list to see whether your tax payment and filing due date is something other than April 15, 2025. Relief is automatically granted in many cases, but you can request relief if you live outside the disaster area but were still affected by calling the IRS disaster hotline.

Also, people who were affected by a federally declared disaster may also be eligible to claim casualty loss deductions on their homes and vehicles. The deduction is designed to reduce your taxable income by the amount of your financial loss after insurance payouts.

One more thing to know: If you provided care as a first responder during or in the wake of a disaster, you might be eligible for tax relief. According to the IRS, the definition of affected taxpayers for disaster relief purposes includes relief workers who are “affiliated with a recognized government or philanthropic organization assisting in a covered disaster area.” “Relief worker” isn’t a defined term, however, so it’s unclear if and which medical workers fall into this group. If you think you might qualify, talk to your tax professional and/or contact the IRS to self-identify for disaster relief.

Join the discussion

What questions do you have about filing your taxes as a physician? Let’s start a conversation in the comments; maybe one of your questions will inspire our next article.