Trump, Doctors and Taxes.

[sevoflurane]

Is this really possible?

The biggest impact might be if you receive a 1099 and operate under a corporation (LLC, S-corp, C-corp). Your corporate tax rate may be lowered from 35% to 15%. All business profit, even income earned by a physician from an S corporation, will be subject to the 15% rate.

http://www.hcplive.com/physicians-m...-presidency-could-affect-doctors-financially/

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[BLADEMDA]

Is this really possible?

The biggest impact might be if you receive a 1099 and operate under a corporation (LLC, S-corp, C-corp). Your corporate tax rate may be lowered from 35% to 15%. All business profit, even income earned by a physician from an S corporation, will be subject to the 15% rate.

http://www.hcplive.com/physicians-m...-presidency-could-affect-doctors-financially/

Yes, you are reading it corrrectly. That said, I don't expect this proposal to be the one which the Senate and the House agree on to become law. Trump will sign any bill that results in lower taxes even if he only gets 1/3 of what he wants.

 

[BLADEMDA]

http://www.cnsnews.com/news/article/terence-p-jeffrey/federal-debt-tops-19900000000000-black-friday
$20 trillion by 01/20/17 and rising

 

[sevoflurane]

http://www.cnsnews.com/news/article/terence-p-jeffrey/federal-debt-tops-19900000000000-black-friday
$20 trillion by 01/20/17 and rising

That's an ugly number. I remember when it was 7-8 trillion not too long ago. Geez.
I agree, probably would be tough to pass.

 

[deleted171991]

Is this really possible?

The biggest impact might be if you receive a 1099 and operate under a corporation (LLC, S-corp, C-corp). Your corporate tax rate may be lowered from 35% to 15%. All business profit, even income earned by a physician from an S corporation, will be subject to the 15% rate.

http://www.hcplive.com/physicians-m...-presidency-could-affect-doctors-financially/

First of all, S-corps, which are most medical practices, don't pay corporate taxes, so whoever wrote the piece is wrong. The S-corp income flows over to the shareholder's personal tax return with 0% corporate tax. So if Trump changes the corporate tax (which does not apply to S-corps), most physicians won't feel a difference, unless personal income taxes on high earners would also significantly decrease. Which I doubt would happen, for the simple reason that the rich and powerful already pay much less than us in personal income tax, so they couldn't care less. They do care about corporate taxes though, because those translate to lower profits, lower stock prices and lower dividends for their businesses.

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

https://www.irs.gov/businesses/small-businesses-self-employed/s-corporations

Now Trump could try to change the law, but I doubt it would pass, because it would decrease the income to the budget by orders of magnitude (on top of changing the corporate tax), since it would impact especially high earners. There are only so many tax cuts possible before the budget becomes really unbalanced.

 

[Mman]

First of all, S-corps, which are most medical practices, don't pay corporate taxes, so whoever wrote the piece is wrong. The S-corp income flows over to the shareholder's personal tax return with 0% corporate tax. So if Trump changes the corporate tax (which does not apply to S-corps), most physicians won't feel a difference, unless personal income taxes on high earners would also significantly decrease. Which I doubt would happen, for the simple reason that the rich and powerful already pay much less than us in personal income tax, so they couldn't care less. They do care about corporate taxes though, because those translate to lower profits, lower stock prices and lower dividends for their businesses.

I think Trump's plan as he mentioned months ago was not to change the corporate tax rate on S-corps which as you point out is already just passed through to personal income taxes, but to treat the passthrough income the individual reports on a K1 from an S-corp to be taxed as a capital gain and not income. So the author of the article is correct about the ultimate outcome they just aren't describing the details right.

So yes, he'd treat the K1 distribution as a capital gain which would drop the marginal rate from 39.6% currently (for high enough earners) to 20% (or 15% if he lower the capital gains rate).

My personal retirement savings account would jump for joy repeatedly if it could cut that rate in half.

I think far more likely is that he just drops the peak rate from 39.6% back to 35% or 33% and maybe cuts capital gains to 15%, but leaves the pass through money as income. I'd still be happy with that.

 

[Ignatius J]

I like the economists that say Trump is going to add to the debt, because you know, Obamacare wasn't going to add "one penny" to the national debt, right guys?

 

[Arch Guillotti]

First of all, S-corps, which are most medical practices, don't pay corporate taxes, so whoever wrote the piece is wrong. The S-corp income flows over to the shareholder's personal tax return with 0% corporate tax. So if Trump changes the corporate tax (which does not apply to S-corps), most physicians won't feel a difference, unless personal income taxes on high earners would also significantly decrease. Which I doubt would happen, for the simple reason that the rich and powerful already pay much less than us in personal income tax, so they couldn't care less. They do care about corporate taxes though, because those translate to lower profits, lower stock prices and lower dividends for their businesses.

Mman is right, K1 income that is passed through an S-Corp will be taxed at a lower rate if Trump follows through.

 

[sleepallday]

Is this really possible?

The biggest impact might be if you receive a 1099 and operate under a corporation (LLC, S-corp, C-corp). Your corporate tax rate may be lowered from 35% to 15%. All business profit, even income earned by a physician from an S corporation, will be subject to the 15% rate.

http://www.hcplive.com/physicians-m...-presidency-could-affect-doctors-financially/

I don't think this would make much difference to most groups since most groups zero out their accounts at the end of the year to avoid a corporate tax burden.

 

[Ezekiel2517]

I don't think this would make much difference to most groups since most groups zero out their accounts at the end of the year to avoid a corporate tax burden.

it most certainly would make a difference for a doc who's an independent contractor who has formed an S-corp and has distributions from it

 

[Arch Guillotti]

I don't think this would make much difference to most groups since most groups zero out their accounts at the end of the year to avoid a corporate tax burden.

It makes an enormous difference if you get distributions/dividends.

 

[caligas]

It makes an enormous difference if you get distributions/dividends.

I get about $100k/year through S corp distributions. If I could pay 15% instead of almost 40% on that, I would take back my Hillary vote and thank all the backwoods ******s that voted for that blowhard Cheeto.

 

[deleted162650]

If this goes through you will see many PP groups change the way they pay themselves.

 

[doctalaughs]

Although that could be good for some docs it seems ripe for abuse. And why should a contractor doc pay a 15% rate when a W2 doc pays 35 or 39% just because they are "a company" in theory. Any number of "contractors" whether docs, wall street people or private equity people will use this rule to reduce their taxes- it will be no different than the hedge fund manager loophole- only easier.

In my opinion he should just lower the rates across the board and there should be no way to "reclassify" earned income to lower your rate.


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[deleted171991]

I get about $100k/year through S corp distributions. If I could pay 15% instead of almost 40% on that, I would take back my Hillary vote and thank all the backwoods ******s that voted for that blowhard Cheeto.

If you live in a blue state, they might "compensate" for your federal tax cuts. There is already talk about it. 😉

 

[caligas]

If you live in a blue state, they might "compensate" for your federal tax cuts. There is already talk about it. 😉

Already left one state with insane state income tax, not afraid to leave another.

 

[sevoflurane]

If you live in a blue state, they might "compensate" for your federal tax cuts. There is already talk about it. 😉

Not entirely true... 😉😉

 

[sevoflurane]

It makes an enormous difference if you get distributions/dividends.

You bet it does...

 

[sevoflurane]

I don't think this would make much difference to most groups since most groups zero out their accounts at the end of the year to avoid a corporate tax burden.

Some groups are loosely put together by an LLC. In those situations you open up an S-corp and run YOUR business.

 

[sevoflurane]

Although that could be good for some docs it seems ripe for abuse. And why should a contractor doc pay a 15% rate when a W2 doc pays 35 or 39% just because they are "a company" in theory. Any number of "contractors" whether docs, wall street people or private equity people will use this rule to reduce their taxes- it will be no different than the hedge fund manager loophole- only easier.

In my opinion he should just lower the rates across the board and there should be no way to "reclassify" earned income to lower your rate.


Sent from my iPhone using SDN mobile

I actually like this idea. As it stands currently, you can opt to use the law to your advantage or not- if in the right situation.

 

[sevoflurane]

Nobody is paying 15% BTW- you still need to adjust for a salary which is taxed at your tax bracket.

 

[deleted126335]

Nobody is paying 15% BTW- you still need to adjust for a salary which is taxed at your tax bracket.

Correct. Under the current rules.

Speculation. Given statements by Trump and Congress suggest that going forward, if the law changes, If a medical practice is organized as an S-corp (which a minority currently are) the dividends they pay will be taxed at 15% instead of current marginal rates. This will be a tremendous incentive for successful private practices to reorganize as S corps instead of C-corps. Not all compensation can be classified as dividends BTW.


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[jw3600]

Correct. Under the current rules.

Speculation. Given statements by Trump and Congress suggest that going forward, if the law changes, If a medical practice is organized as an S-corp (which a minority currently are) the dividends they pay will be taxed at 15% instead of current marginal rates. This will be a tremendous incentive for successful private practices to reorganize as S corps instead of C-corps. Not all compensation can be classified as dividends BTW.


Sent from my iPhone using SDN mobile app

Your SDN profile picture and signature are two of my favorite lines/scenes ever in pop culture. Love it.

 

[caligas]

Your SDN profile picture and signature are two of my favorite lines/scenes ever in pop culture. Love it.

"These candidates make me want to vomit in terror," -Homer Simpson

 

[deleted126335]

Your SDN profile picture and signature are two of my favorite lines/scenes ever in pop culture. Love it.

Thanks. Many don't appreciate my outlook or sense of humor.

 

[BLADEMDA]

McConnell, Warning of ‘Dangerous’ Debt, Wants Tax Cut Offsets

https://www.bloomberg.com/politics/...rning-of-dangerous-debt-wants-tax-cut-offsets

 

[dhb]

All of a sudden the debt level is unacceptable 😱
Thought that was years ago bit hey.

 

[ambiturner]

So now that the proposal is getting some press: Winners and Losers in the Trump Tax Plan

Does anybody stand to gain anything substantial from this, other than perhaps partners that distribute bonuses as dividends? I'm pretty sure I'll be getting taxed more as a result of losing the deduction for state and local taxes.

 

[Ezekiel2517]

So now that the proposal is getting some press: Winners and Losers in the Trump Tax Plan

Does anybody stand to gain anything substantial from this, other than perhaps partners that distribute bonuses as dividends? I'm pretty sure I'll be getting taxed more as a result of losing the deduction for state and local taxes.

Yes, any physician who is 1099. They can create an S-corp for themselves. They'd benefit greatly.

 

[anbuitachi]

Read all the posts above. confusing since im not 1099 or s corp. It seems like some ppl are saying set up S corp and income tax turns to flat 15%?? Others talk about dividends? What are dividends for a 1099

 

[Planktonmd]

This alleged tax reform is nothing more than another media stunt that has no roots in reality and has zero chance of ever passing.
It's comparable to hitting an airport in Syria with 59 Tomahawks just to say we did something.

 

[DrCommonSense]

I get about $100k/year through S corp distributions. If I could pay 15% instead of almost 40% on that, I would take back my Hillary vote and thank all the backwoods ******s that voted for that blowhard Cheeto.

Yeah we would like to thank all the low T beta males and angry feminist schrews that avoided coming out in key states so they would not elect thunderthighs. Unfortunately more of them didn't stay home but enough did to throw the election for Trump. I guess many of them were too busy coloring their hair pink or putting weird piercings and tats all over their already mostly obese physiques.

Bravo guys! At least I get some benefit here!

 

[DrCommonSense]

Already left one state with insane state income tax, not afraid to leave another.

Please don't come to a conservative state when you are running away from liberal *****ic policies that destroyed your state.

Funny how liberals run from their states after they destroyed them with high taxes, welfare, etc and then vote for the SAME politicians who would do the SAME in the new state.

 

[deleted126335]

Don't blame me. I voted for KODOS.

 

[Mad Jack]

As much as I like more money, I really like my money being worth something, and that requires deficit reduction, which requires money.

 

[facted]

Please don't come to a conservative state when you are running away from liberal *****ic policies that destroyed your state.

Not that I love getting taxed or anything, but I'd like to point out that the two most highly taxed states, NY and California are quite popular places to live hahaha.

Meanwhile, if you want to see how far the Republican tax cuts can go, take a look at Kansas where taxes are basically non-existent. It isn't pretty.

 

[urge]

Please don't come to a conservative state when you are running away from liberal *****ic policies that destroyed your state.

Funny how liberals run from their states after they destroyed them with high taxes, welfare, etc and then vote for the SAME politicians who would do the SAME in the new state.

I enjoyed the irony of her situation.

 

[urge]

Not that I love getting taxed or anything, but I'd like to point out that the two most highly taxed states, NY and California are quite popular places to live hahaha.

Meanwhile, if you want to see how far the Republican tax cuts can go, take a look at Kansas where taxes are basically non-existent. It isn't pretty.

And you adjusted for being on the coasts which way?

 

[GravelRider]

Please don't come to a conservative state when you are running away from liberal *****ic policies that destroyed your state.

Funny how liberals run from their states after they destroyed them with high taxes, welfare, etc and then vote for the SAME politicians who would do the SAME in the new state.

Are those conservative states going to stop accepting the federal government handouts and the redistribution of wealth from New York and California? That would go a long way in reducing the deficit and allowing true tax reform to happen.

 

[urge]

Mman is right, K1 income that is passed through an S-Corp will be taxed at a lower rate if Trump follows through.

Do you have any supporting evidence for this statement?

 

[urge]

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

I don't see why you guys are jumping for joy.

S corp and LLC already pay 0% tax rate. And you will pay your individual tax rate (35%) on all distributions.

The benefit will be for C corps. They will decrease form 35% tax rate to 15%. Distributions will pay maybe 20% investment income rate, only if they are considered Qualified dividends. Otherwise it is 35% again. And even then it is not so rosy:

At first blush, then, it appears that taking a dividend is the way to go. But don't forget: a C corporation -- unlike a partnership or an S corporation -- is a tax-paying entity, so we must also consider the effect of the chosen payment on the corporation. Employee salary and bonuses -- as well as the payroll taxes on the amounts paid -- are deductible by the corporation, and with a 35% corporate tax rate, each dollar paid as compensation saves the corporation 35 cents in tax. To the contrary, dividends are not deductible by the corporation, and thus the corporation derives no benefit from making a dividend payment.

Even as a dividend the over all taxation is 35%

 

[Ignatius J]

Are those conservative states going to stop accepting the federal government handouts and the redistribution of wealth from New York and California? That would go a long way in reducing the deficit and allowing true tax reform to happen.

My red state takes fewer dollars per capita from the federal government than Cali and New York and we aren't even robbed with a state income tax either. Come to think of it, lots of Cali folks are popping up here. What is Cali doing with that money?

I saw Cali proposed a universal healthcare system this week that would massively increase their state budget. They have officially gone off the deep end.

Top 10 States For Federal Spending Per Capita

 

[Ezekiel2517]

I don't see why you guys are jumping for joy.

S corp and LLC already pay 0% tax rate. And you will pay your individual tax rate (35%) on all distributions.

The benefit will be for C corps. They will decrease form 35% tax rate to 15%. Distributions will pay maybe 20% investment income rate, only if they are considered Qualified dividends. Otherwise it is 35% again. And even then it is not so rosy:



Even as a dividend the over all taxation is 35%

This is incorrect. Talk to a CPA. Docs who incorporate will certainly be "jumping for joy". I believe WCI also posted about this on this site or somewhere else how the change would significantly reduce taxes for corps

 

[urge]

Mman is right, K1 income that is passed through an S-Corp will be taxed at a lower rate if Trump follows through.

Let's put this to rest. Not going to happen.

Republican presidential nominee Donald Trump has dropped a major tax cut for businesses organized as pass-through entities, including partnerships, from his tax overhaul proposals, according to the latest version of those plans.

The change will make Trump’s plan much less favorable for private-equity partners, hedge fund managers and others who receive income from partnerships, limited liability companies and S corporations. Such entities don’t pay income taxes themselves, but pass their earnings through to their owners, who are taxed at individual rates.

 

[urge]

This is incorrect. Talk to a CPA. Docs who incorporate will certainly be "jumping for joy". I believe WCI also posted about this on this site or somewhere else how the change would significantly reduce taxes for corps

Trump Tax Plan Drops 15% Rate for Hedge Funds, Partnerships

 

[urge]

Trump’s Corporate Tax Reforms: What CFOs Need to Know

Good read for all those who suffer from DrfluffyMD's insult of choice: ignorance.

 

[Arch Guillotti]

Do you have any supporting evidence for this statement?

Not really, but everything I have read supports this position. Trump's tax plan as written (all 1 page of it) essentially stands zero chance of getting passed.

 

[Arch Guillotti]

Let's put this to rest. Not going to happen.

Agree.

 

[Ignatius J]

Not really, but everything I have read supports this position. Trump's tax plan as written (all 1 page of it) essentially stands zero chance of getting passed.

It may, but there is a strategy behind it. It will be very public who opposed tax breaks for all Americans.

Our economy grew an anemic and almost stagnant 0.7% YoY for the quarter so we are evoking the definition of insanity. We have a blueprint for economic growth through tax cuts with Reagan. It's like I am living in an alternate universe with the Left.

 

[Arch Guillotti]

It will be very public who opposed tax breaks for all Americans.

Especially the rich Americans.