Wellness

Money Minutes for Doctors #2

We are back with our second episode of Money Minutes for Doctors. Joining us again for another look into the world of personal financial wellness for physicians and their families is Katherine Vessenes, JD, CFP®, RFC, Founder and President of MD Financial Advisors. This month's discussion delves into the myriad changes brought on by new tax code. Will it be tax armageddon or tax heaven for those of us in medicine? Money Minutes focuses on the unique challenges facing physicians and the topic of financial well-being; as well as providing guidance in formulating strategies for a lifetime of security.

Katherine Vessenes, MD Financial

Katherine Vessenes, MD Financial

About Ms. Vessenes:

Ms. Vessenes works with over 300 physicians and dentists from Hawaii to Cape Cod. Her firm uses a team of experts to provide comprehensive financial planning to help doctors build their wealth and protect their wealth while reducing taxes now and in the future. Katherine is a longtime advocate for ethics in the financial services industry; and has written three books on the subject of investment strategies. She has received many honors and awards including: numerous tributes from Medical Economics as a top advisor for doctors, multiple 5-Star Advisor Awards, honored as a Top Woman in Finance, in addition to being selected to be on the CFP® Board of Ethics. Katherine can be reached at: Katherine@mdfinancialadvisors.com or 952-388-6317. Her website: www.mdfinancialadvisors.com.

QUICK SUMMARY

Physicians/dentist who are employees and either filing individual of MFJ (Married filing jointly) will most likely realize a modest tax cut with about 5% paying more and 5% with no change. 

** HAVE A GOOD ACCOUNTANT TO HELP YOU PLAN AND SORT THROUGH THESE CHANGES**

Benefits of New Tax Law Changes:

(1)   Physicians /dentists who own their own practice, particularly a C corp, will see the elimination of the corporate minimum tax and a reduced tax rate down to 21 % (permanent changes)

(2)   Brackets – top rate of federal bracket was 39.6 % and now reduced to 37%. Brackets are now bigger so more of your income subject to less tax.  Remember, only dollars above a certain amount are taxed at the highest rates.

--States that are big winners are those without state taxes (i.e. TN, TX, FL and others)

(3)   Increase in the amount of the standard deduction

You can file taxes with (A) standard deduction or (B) itemized deductions.  Can calculate both, and whichever results in the lowest tax burden is the one you file. Standard deduction is increased to $12k for single filers and $24K for married filers. Likely means more may file with  standard deductions (previously approx. 30%  filed w itemized deductions, and now predicted to drop to about 10% ) which has potential to save you money on tax preparation. 

(4)   Child tax credit doubled to $2000.

(5)   Charitable contributions are roughly unchanged, perhaps a slight improvement and can continue to deduct charitable contributions

(6)   Physicians in the not-for-profit student loan forgiveness program are NOT impacted.   The program remains intact.

(7)   Long term capital gains and dividend rules are unchanged.  Federal long capital gain tax brackets are 15-20% and unchanged.   This is good news is that these rates are less than ordinary income tax rates so suggest to have more income from long term capital gains as you make investment choices.

(8)   Retirement account contributions (contributions that are made pretax) can still be deducted i.e. 401K, 403B

(9)   Estate Exemptions doubled up to $11.2 million for individuals and $22.4 Million for couples which means you can have an estate worth this value that can be passed to children without paying federal estate tax.  However state estate tax remains in effect (States w high estate tax are RI,FL, MA) and need to have thorough estate planning to help minimize the impact of this tax – with good planning can avoid much of this tax burden!!

Downside of New Tax Law Changes:

(1)   Personal tax exemption (previously at $4150) has been eliminated.  This was a deduction that you were eligible to take just for filing per person in the household.  This was eliminated in order compromise for an increased standard deduction

(2)   Physicians in the highest taxed states will see biggest impact as now $10k cap on state and local taxes (SALT ).  Highest Impacted: NY, CA, NJ, MN, MD as have high tax rates

a.     Some states have in their constitutions that must balance budget and cannot borrow money and result is that there is no state income tax. i.e. TN, TX

b.     Other states w high tax rates (i.e CA w 13%) can still deduct taxes (including real estate) but now has a $10 K cap. 

c.     The cap is not per person but per filer so if MFJ cap remains at  $10K

d.     Has potential to cause residents to move to more tax friendly states and can potentially have impact on property values in those high tax states – Stay Tuned! 

e.     Should think about state tax rates when you are job hunting

(3)            Alternative Minimum Tax (ALT) on itemized deductions remains intact.  This was a tax applied if you completed an itemized filing to ensure that some “minimum” tax was collected.   

Pearls and pitfalls:

-       Taxes that you pay today and in the future have a far bigger impact on your personal security than any changes in the stock market and thus you must take tax planning very seriously

-       Meet with your account early this year to be sure you are maximizing your tax savings throughout as much of 2018 as you can

-       A lot of tax advantages of having a side business – 1099 income, owning a practice etc. and new tax laws offer many new advantages. More to come on that!

***Disclaimer: please note this is far from comprehensive and only serves as a written template to the material discussed in this edition of the podcast. 

An Interview with Dr. Arlene Chung

Welcome to the Brown University EM Podcast and our Visiting Professor Series, featuring resident interviews with guest lecturers on their careers, their expertise, and their advice for emergency medicine residents.

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In this episode of the Brown Emergency Medicine Podcast Series we interview Dr. Arlene Chung, one of our own residency graduates and a leader in the world of Wellness. Dr. Chung is the Associate Residency Director at Icahn School of Medicine at Mt. Sinai and holds numerous leadership positions promoting well-being.

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Arlene S. Chung, MD, MACM

Associate Program Director

Mount Sinai Emergency Residency Program

Wellness and Resilience Expert

In this episode of the Brown EM Podcast we hear how Dr. Chung rose to become one of the most prominent names in physician wellness. She addresses the issues of physician burnout, physician suicide and discusses some current initiatives designed to foster a supportive culture and maintain resiliency. Find out what Dr. Chung views as some of medicine’s biggest hurdles and hear her advice for tackling them throughout your career.

LISTEN NOW:

Faculty content and audio editor: Dr. Kristina McAteer

Technical support: Dr. Thomas Ross and Dr. Tim Boardman

Catch our other interviews and other new series on our new Brown EM Podcast iTunes stream. Subscribe here!

 

Money Minutes for Doctors

Welcome to our inaugural episode of Money Minutes for Doctors. For our first foray into the shifting sands of medical finance we speak with expert navigator Katherine Vessenes, JD, CFP®, RFC, Founder and President of MD Financial Advisors. The goal of this monthly podcast is to help provide fellow physicians with a solid foundation of financial knowledge. Money Minutes focuses on the unique challenges facing physicians and the topic of financial well-being; as well as providing guidance in formulating strategies for a lifetime of security.

 

Katherine Vessenes, MD Financial

Katherine Vessenes, MD Financial

About Ms. Vessenes:

Ms. Vessenes works with over 300 physicians and dentists from Hawaii to Cape Cod. Her firm uses a team of experts to provide comprehensive financial planning to help doctors build their wealth and protect their wealth while reducing taxes now and in the future. Katherine is a longtime advocate for ethics in the financial services industry; and has written three books on the subject of investment strategies. She has received many honors and awards including: numerous tributes from Medical Economics as a top advisor for doctors, multiple 5-Star Advisor Awards, honored as a Top Woman in Finance, in addition to being selected to be on the CFP® Board of Ethics. Katherine can be reached at: Katherine@mdfinancialadvisors.com or 952-388-6317. Her website: www.mdfinancialadvisors.com.

Quick Summary:

  • How did you become interested in helping doctors? Raised in medical family with physician father and nurse mother and learned from their financial decisions.

  • Physicians are working in a much different environment today than previously. There have been changes in taxes, market performance, salaries and professional liability.

  • Physician finances are unique because (1) medical school provides no financial education (2) late start toward earning an income resulting in less time to save, (3) physicians have high debt (4) physicians want to retire early and overall have a long life expectancy (5) physicians are in hight tax bracket (now and in the future) and (6) physicians are high risk for lawsuits.

  • Make good decisions regarding debt. Do not take out any more debt than absolutely needed. Consider a state school rather than private or for profit institutions.

  • Physician are busy and can’t spend time on finances. Taxes are a large problem for physicians. Common myth that hight tax bracket during years of employment but will be lower in the future however not necessarily true as physicians are in a high tax bracket during their employment and in retirement. Financial plans should work to reduce taxes now and in the future. Physicians are well known to make poor investments. Physicians are highly educated and perhaps makes them over confident in their decisions.

  • Lawsuits are a reality of modern medicine. Physicians are always at risk for lawsuits. Ms. Vaseness has not herself encountered physicians sued for more than their malpractice policy. Physicians are viewed as wealthy and thus can be target for lawsuits.

  • Be aware of your financial decisions. Know where your money is going. The reality is that you will not be able to buy everything. Focus on your top priorities for your happiness and spend money on those things rather than extras (clothes, cars etc). Make sure you control your money and your money does not control you. After taxes your salary is not as much money as you think.

Pearls & Pitfalls

  1. "Do you want to look rich or be rich?"

  2. Live like a resident early on as an attending and aggressively work to manage debt.

  3. Save early, as compounded interest will benefit you. “It's not how much money you make, but how much you keep”. Be disciplined in your saving and make it a habit.

  4. Be aware of your tax liability and plan appropriately.