Loans, Taxes, All that "Good" Stuff

[pharmacymonster]

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Hi Guys!

I know there's been many posts/ forums about all of this, but I thought an additional post might not hurt 🙂

New grad pharmacist here, and I'm trying to decrease how much I'm being taxed. I know people have mentioned maxing out a 401k and having a high deductible health plan...but I'm in a union! (So I don't really have either option b/c I don't have a 401k and I don't have an option on which insurance plan I'm part of)

Also I read some posts here about increasing the number of your allowances, and I was hoping someone would provide a little more information on the benefits of that...

I'm a newbie to all this so any ways to save money will help GREATLY 🙂

 

[Monsterdaddy]

I am pretty certain your employer (and not the union) has a 401(k) or 403(b) plan to contribute too. Doublecheck that first.

Flexible spending accounts for medical expenses (co-pays, prescriptions) also reduce your taxes and the max contribution is $2250 but it is use it or lose it.

Allowances are irrelevant to how much your final tax bill is, they affect your withholding from your paycheck.

 

[PharmDBro2017]

In for advice as well.

 

[Momus]

It can be done if you have your own business, by spending a lot. If you are JUST an employee, there is NO way to get a lot of deductions:

1. Write off up to $10,000 in start-up expenses (-5000/year average).
2. Legitimate business expenses are flexible: ~ $5,000

• Even if you buy a computer, a cellphone and a car primarily for business use, most of your your utilities bill, you can use them for personal purposes as well. If you happen to take a business trip to Florida in, say, January, no one is going to stop you from enjoying the sunshine or taking a dip in the pool.

3. Pay yourself Medicare and Social Security taxes $19,000 – ½ can be deducted $9500
4. Contribute to Solo 401k - $50,000k ($18,000 employee contribution and 20% of net profit of employers the rest – pretax profit at least $205k to max solo 401k)

• Spouse 401k

5. Traditional IRA $5,000

• Spouse IRA

6. State and Local taxes $10,000
7. Tax loss harvesting $3,000
8. Mortgage interest 4% rate @300,000 loan - $10,000
9. Property taxes $3,000
10. Premium for yourself health insurance is deductible $10,000
11. Health saving account contribution $5,000, Flexible Spending account $2,250
12. Personal exemption $3,700
13. Home equity loan to make improvement in the house $1,500 max
14. Have a couple kids = more tax deduction
15. This all will give you around $140k total deductions!!!

The key is to spend what the government encourage you to spend, house, business, health, retirement, and family, spend spend spend to get all the deduction you want. 0 Tax = cha-ching!!!

 

[pezdispenser]

One significant way to pay less tax is to move to a state that does not have state income tax like FL, TX, WA, TN.

With $120k income, in CA you would pay $10k in state income tax + SDI. NYC = $11.5k with city tax as well.

Spending more money on something that you would not otherwise buy, just so that you get the tax deduction doesn't really make sense. You only reduce your taxes by 28% or whatever. So don't go opening up a side business or go to conferences just to rack up expenses.

Another good thing about the states with no income tax is that you still get the $6.3k/12.6k married standard deduction, and you don't have to spend anything on state taxes, property taxes, mortgage interest, etc. So you could just rent a cheap place and still get the standard deduction.

Changing W-4 allowances is just to make sure that the tax that your employer withholds matches what your total tax bill will be on your tax return. It does not change your actual tax bill. I already wrote about it in this thread: http://forums.studentdoctor.net/threads/pharmacists-take-home-pay.1173593/

 

[Eichhoernchen]

The key is to spend what the government encourage you to spend, house, business, health, retirement, and family, spend spend spend to get all the deduction you want. 0 Tax = cha-ching!!!

So if you're young, single and have no interest in the above, you are out of luck. 🙁

 

[BMBiology]

One significant way to pay less tax is to move to a state that does not have state income tax like FL, TX, WA, TN.

With $120k income, in CA you would pay $10k in state income tax + SDI. NYC = $11.5k with city tax as well

I want to point out state income tax is a tax deduction until you hit the alternative minimum tax (AMT)....not going to happen with 120 k salary.

States have a way to tax you. Texas does not collect state income tax but it has a high property tax. Employers may pay you less because there is no state income tax. AND how can you beat California's spring like weather throughout the year?

 

[BMBiology]

You already have plenty of ways to reduce your tax: 18 k for 401 k, 3 k for health saving account, health insurance (1-2 k). That is more than 22 k in tax deduction. The problem is do you have that kind of money to spend while also saving for a wedding, a house?

 

[BMBiology]

It can be done if you have your own business, by spending a lot. If you are JUST an employee, there is NO way to get a lot of deductions:

1. Write off up to $10,000 in start-up expenses (-5000/year average).
2. Legitimate business expenses are flexible: ~ $5,000

• Even if you buy a computer, a cellphone and a car primarily for business use, most of your your utilities bill, you can use them for personal purposes as well. If you happen to take a business trip to Florida in, say, January, no one is going to stop you from enjoying the sunshine or taking a dip in the pool.

3. Pay yourself Medicare and Social Security taxes $19,000 – ½ can be deducted $9500
4. Contribute to Solo 401k - $50,000k ($18,000 employee contribution and 20% of net profit of employers the rest – pretax profit at least $205k to max solo 401k)

• Spouse 401k

5. Traditional IRA $5,000

• Spouse IRA

6. State and Local taxes $10,000
7. Tax loss harvesting $3,000
8. Mortgage interest 4% rate @300,000 loan - $10,000
9. Property taxes $3,000
10. Premium for yourself health insurance is deductible $10,000
11. Health saving account contribution $5,000, Flexible Spending account $2,250
12. Personal exemption $3,700
13. Home equity loan to make improvement in the house $1,500 max
14. Have a couple kids = more tax deduction
15. This all will give you around $140k total deductions!!!

The key is to spend what the government encourage you to spend, house, business, health, retirement, and family, spend spend spend to get all the deduction you want. 0 Tax = cha-ching!!!

Not so fast...you forgot the alternative minimum tax (AMT) which excludes tax deductions like state income tax, property tax (unless it is for your business then you can write it as an expense), etc.

 

[opinionfree]

My Father always taught me, you make more doing what you know, than trying to save, by doing what you don't know.
Translation: you are a pharmacist, you make money pharmacing (new word). You are NOT a financial planner, you will loose money financial planning.
Despite the sterling financial credentials of the above, find a nice certified financial planner (one that serves the rich people in town. if you live in SoCal, I can introduce you to mine)and let them do their job.

Question: Would you allow the pharmacy cashier (not even a tech) to calculate and compound an IV aminoglycoside script for your baby?

Answer: No.

Argument: but the cashier knows LOTS of pharmacy stuff.

Pharmacists think they know LOTS regarding the fast changing world of investing and taxes. Maybe they do, most likely they don't. For every 1, that's done a decent job for themselves, you'll find 100 that haven't.

 

[Momus]

My Father always taught me, you make more doing what you know, than trying to save, by doing what you don't know.
Translation: you are a pharmacist, you make money pharmacing (new word). You are NOT a financial planner, you will loose money financial planning.
Despite the sterling financial credentials of the above, find a nice certified financial planner (one that serves the rich people in town. if you live in SoCal, I can introduce you to mine)and let them do their job.

Question: Would you allow the pharmacy cashier (not even a tech) to calculate and compound an IV aminoglycoside script for your baby?

Answer: No.

Argument: but the cashier knows LOTS of pharmacy stuff.

Pharmacists think they know LOTS regarding the fast changing world of investing and taxes. Maybe they do, most likely they don't. For every 1, that's done a decent job for themselves, you'll find 100 that haven't.

Only *****s trust their money management with a financial planner. The only person you can trust to handle your money is yourself. For every 100 financial planners out there, 100 of them looking to rip you off and save themselves a nice vacation cruises, college education for their own kids, and a fat retirement savings. There is ALWAYS something to lose by handling your money to them. No one other than yourself can better serve what you can do best with your money. Time is money. This rings true for us "just an employee"; you are trading your life/time away for money. If you don't value your time, go ahead grab a truck load of your money and hand it to a bunch of strangers. I am sure they serve your best interest. Or, you can do yourself a favor... Study how to manage yours is the most important lesson you can have until you die. I don't get to where I am, trusting these so called financial ripoffs.

 

[opinionfree]

Only *****s trust their money management with a financial planner. The only person you can trust to handle your money is yourself. For every 100 financial planners out there, 100 of them looking to rip you off and save themselves a nice vacation cruises, college education for their own kids, and a fat retirement savings. There is ALWAYS something to lose by handling your money to them. No one other than yourself can better serve what you can do best with your money. Time is money. This rings true for us "just an employee"; you are trading your life/time away for money. If you don't value your time, go ahead grab a truck load of your money and hand it to a bunch of strangers. I am sure they serve your best interest. Or, you can do yourself a favor... Study how to manage yours is the most important lesson you can have until you die. I don't get to where I am, trusting these so called financial ripoffs.

I think it unkind to say that someone is a '*****' predicated on their utilization of the the services of a financial planner. I'm hearing a little bit of a Freudian slip here. Screams about the success you've achieved. Silly Goose. You buy with a discount broker, don't turn your money over to one. Save a penny but loose a pound. The typical pharmacist mentality.
I'm not your investment counselor. You've obviously had a bad experience, most likely warranted from your hostile attitude.

So where's the line:
Should I use my gun and shoot the criminals or the stupid (run)? The cops are all dirty anyway.
My cashier should formulate and fill your child's aminoglycoside script? The cashier knows where the vanco is already and the child already has the handicap of you.

Are we to believe that rates of return and tax sheltering, on the excess of 1 trillion dollars under the advise and management of licensed financial professionals, is inferior to a few pharmacists watching CNBC and reading the Motley Fool? Really?

 

[Momus]

I think it unkind to say that someone is a '*****' predicated on their utilization of the the services of a financial planner. I'm hearing a little bit of a Freudian slip here. Screams about the success you've achieved. Silly Goose. You buy with a discount broker, don't turn your money over to one. Save a penny but loose a pound. The typical pharmacist mentality.
I'm not your investment counselor. You've obviously had a bad experience, most likely warranted from your hostile attitude.

So where's the line:
Should I use my gun and shoot the criminals or the stupid (run)? The cops are all dirty anyway.
My cashier should formulate and fill your child's aminoglycoside script? The cashier knows where the vanco is already and the child already has the handicap of you.

Are we to believe that rates of return and tax sheltering, on the excess of 1 trillion dollars under the advise and management of licensed financial professionals, is inferior to a few pharmacists watching CNBC and reading the Motley Fool? Really?

Bad experience? I have never had one and I will NEVER need one. I said it again financial planners are for *****s who are too lazy or too stupid to learn one of the most important subject in life, money. You can hand over your money away to a bunch of strangers. I ain't one of those *****s. Just because you are incapable of learning about money yourself, either too lazy or too stupid, it doesn't mean we are all like you. Keep listening to CNBC, Jim Cramer, and Motley Fool, I am sure that's all you've learned so far about "financial planning".

 

[confettiflyer]

If you can't figure out how to index invest in low ER funds, you don't deserve to be a pharmacist.

We're pharmacists, we're expected to be quasi-experts in everything, one of the things we do well is learn on the fly and learn new things.

Learning how to invest and optimize taxes is no different from being an IM or critical care pharmacist being tasked to learn chemotherapy and oncology agents.

But if you want to waste money with some financial planner with no fiduciary duty to you, feel free to waste your money.

 

[confettiflyer]

I think it unkind to say that someone is a '*****' predicated on their utilization of the the services of a financial planner. I'm hearing a little bit of a Freudian slip here. Screams about the success you've achieved. Silly Goose. You buy with a discount broker, don't turn your money over to one. Save a penny but loose a pound. The typical pharmacist mentality.
I'm not your investment counselor. You've obviously had a bad experience, most likely warranted from your hostile attitude.

So where's the line:
Should I use my gun and shoot the criminals or the stupid (run)? The cops are all dirty anyway.
My cashier should formulate and fill your child's aminoglycoside script? The cashier knows where the vanco is already and the child already has the handicap of you.

Are we to believe that rates of return and tax sheltering, on the excess of 1 trillion dollars under the advise and management of licensed financial professionals, is inferior to a few pharmacists watching CNBC and reading the Motley Fool? Really?

This is the dumbest thing I've read all day.

You can't even use the word "loose" correctly. Jesus Christmas.

 

[opinionfree]

Dumb and Dumber.
Jack of all trades and masters of none.

Are you 2 serious? (Momus and confettiflyer) A question was posed by a NEWLY licensed pharmacist, regarding financial advice on a forum for the learning and sharing of ideas. As a NEWLY licensed pharmacist, making piles of money while mastering his/her NEWLY acquired pharmacy education, he might not have the time to play pretend investment guru (like each of you). Sage advice is to hire a certified financial planner. A mistake early in the game, could seriously negate the need for ANY financial advice. Perhaps he wants to enjoy his money and not waste his precious youth pretending to be Warren Buffett (again, like each of you).

Not sure why the anger is directed towards me, definitely not indicative of your success. Are the delusional beliefs you maintain about your 'success' feeling threatened? Are your spouses (even I can't keep a straight face thinking someone would want either of you) expecting to see the imaginary profits you've been boasting about? Do you fear fantasy followers will no longer want your particular wisdom involving investing?
A shake of my good ol' Magic 8-Ball says, 'Signs point to yes'.
Throwing jargon around, desperate to be thought of as not only a pharmacist, but a wizard of Wall Street. We're all SOOOO impressed. NOT!!!
Success affords me confidence in my writing, something so painfully absent in all your posts. No need for hostility because I feel no pressure to impress the OP, or anyone else, to find fulfillment in my musings.
Can either of you say the same?

Aren't there any shrinks on this site?

 

[Momus]

Dumb and Dumber.
Jack of all trades and masters of none.

Are you 2 serious? (Momus and confettiflyer) A question was posed by a NEWLY licensed pharmacist, regarding financial advice on a forum for the learning and sharing of ideas. As a NEWLY licensed pharmacist, making piles of money while mastering his/her NEWLY acquired pharmacy education, he might not have the time to play pretend investment guru (like each of you). Sage advice is to hire a certified financial planner. A mistake early in the game, could seriously negate the need for ANY financial advice. Perhaps he wants to enjoy his money and not waste his precious youth pretending to be Warren Buffett (again, like each of you).

Not sure why the anger is directed towards me, definitely not indicative of your success. Are the delusional beliefs you maintain about your 'success' feeling threatened? Are your spouses (even I can't keep a straight face thinking someone would want either of you) expecting to see the imaginary profits you've been boasting about? Do you fear fantasy followers will no longer want your particular wisdom involving investing?
A shake of my good ol' Magic 8-Ball says, 'Signs point to yes'.
Throwing jargon around, desperate to be thought of as not only a pharmacist, but a wizard of Wall Street. We're all SOOOO impressed. NOT!!!
Success affords me confidence in my writing, something so painfully absent in all your posts. No need for hostility because I feel no pressure to impress the OP, or anyone else, to find fulfillment in my musings.
Can either of you say the same?

Aren't there any shrinks on this site?

What a troll... Another dumb comment. Right now, you are only making a fool of yourself.

 

[awval999]

Dumb and Dumber.
Jack of all trades and masters of none.

Are you 2 serious? (Momus and confettiflyer) A question was posed by a NEWLY licensed pharmacist, regarding financial advice on a forum for the learning and sharing of ideas. As a NEWLY licensed pharmacist, making piles of money while mastering his/her NEWLY acquired pharmacy education, he might not have the time to play pretend investment guru (like each of you). Sage advice is to hire a certified financial planner. A mistake early in the game, could seriously negate the need for ANY financial advice. Perhaps he wants to enjoy his money and not waste his precious youth pretending to be Warren Buffett (again, like each of you).

Not sure why the anger is directed towards me, definitely not indicative of your success. Are the delusional beliefs you maintain about your 'success' feeling threatened? Are your spouses (even I can't keep a straight face thinking someone would want either of you) expecting to see the imaginary profits you've been boasting about? Do you fear fantasy followers will no longer want your particular wisdom involving investing?
A shake of my good ol' Magic 8-Ball says, 'Signs point to yes'.
Throwing jargon around, desperate to be thought of as not only a pharmacist, but a wizard of Wall Street. We're all SOOOO impressed. NOT!!!
Success affords me confidence in my writing, something so painfully absent in all your posts. No need for hostility because I feel no pressure to impress the OP, or anyone else, to find fulfillment in my musings.
Can either of you say the same?

Aren't there any shrinks on this site?

Brah, they aren't pretending to be Warren Buffett. Or a wizard of Wall Street.

They both (and myself, and others on the forum) invest in low cost, index funds. The fees and higher expense ratios that "professional financial planners" charge are greater than the alpha that they can generate.

You are coming off quite obnoxious. And you are way out of your league talking to those two about finances.

 

[Dr Wario]

Personal financial literacy for a typical pharmacist is not some massively complicated pursuit that will stretch the intellect to the extreme, the truth is that most aspects of it are quite simple. Spend less than you make, don't get into stupid debt and most certainly do not pretend you are Warren Buffet because you don't have his talent, position and time to invest. What you can do is use evidence based finance (EBF) to diversify your portfolio, have a high savings rate, minimize taxes in an intelligent manner, and above all, have the discipline to stay the course. Now I will say, there is a place for financial planners, that place is generally reserved for those that are already very rich and their estate is quite complicated, or people that do not have the discipline to not sell all of their investments when markets get bad. The real problem with financial planners for most pharmacists is that to find a worthwhile one, it takes as much knowledge as it would have taken to simply do it yourself.

To reverberate what the other posters have already said, learning about personal finance will net you more money on an hourly basis than any other activity you will ever pursue in your life.

 

[Ackj]

I put money into an S&P fund, earn 5%. You pay 2% a financial planner to put money into an S&P fund that makes 5%. And even when it goes down, you're still paying them. You will earn less and lose more.

 

[IWantTheGenetic]

Get thee to https://www.bogleheads.org/forum/index.php and educate yourself.

 

[confettiflyer]

Better yet get a roboadvisor for 25 basis points if you really don't know what you're doing and are unwilling to read 10 mins worth of material that's less complicated than your average IDSA guideline.

"A fool and his money are soon parted."

But I guess opinionfree has a point, if you're not smart enough to multitask or learn and can only do ONE thing with your brain (being a pharmacist), then it makes sense to outsource to someone who will give it to you from behind with fees.

Dumb people need full service investment advice, I got it now.

 

[pharmacymonster]

I want to thank everyone for their input!

But no need to be mean to each other, we're all pharmacists here and we're all entitled to our own opinions 🙂

 

[pezdispenser]

In the grand scheme of things, also try to develop more of a capitalist mindset to earn money by investing it, rather than just being a wage earner. The tax system is much more favorable to investment earnings through things like:
- 15% tax on long-term capital gains and qualified dividends
- Back door Roth IRA. All earnings completely tax free.
- Even your own primary residence gets a $250k/$500k married capital gains exemption

Whereas on earned income you pay 33-36%:
- 25%, 28% tax brackets
- 6.2% Social Security up to $118,500
- 1.45% Medicare

 

[BMBiology]

^^ good point. I would also suggest you have an emergency fund for at least 6 months (12 months if you have a mortgage). I like my fund to be in cash not only because it is accessible but also because I see an investment opportunity.