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salary going up 7x next year, what tax advantages to use?

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  • salary going up 7x next year, what tax advantages to use?

    So next June I will be done with residency and will see my salary go up 7x. What tax strategies can I use to decrease my tax burden. I obviously can't deduct my student loan or use a roth ira. I can use a roth 401k, but beyond that what else. I rent my place and I don't want to buy a place since I am happy with the place I rent. Luckily my only debt is a $800/month student loan for 30 years. Interest rate is 2.75%.

  • #2
    If you contribute to a regular 401k instead of a roth 401k, that will reduce your taxable income. The disadvantage is that you will pay more tax at retirement if you are taking money out of a 401k/IRA than out of a roth IRA. Otherwise, there's not much you can do to reduce your tax burden until you are ready to buy a home and have kids.

    You might consider buying a condo or townhouse -- you get apartment-style living and the tax break. The homeowner's association takes care of the exterior maintainence, so it's not as much work as owning a house.

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    • #3
      Originally posted by zetta View Post
      Otherwise, there's not much you can do to reduce your tax burden until you are ready to buy a home and have kids.
      Unfortunately, this is true. I'm in the same boat as you and it blows. Are you going to be an employee or independent contractor next year? It behooves you to be an independent contractor if possible. You'll have more substantial tax write offs and you can open a sep-ira. The later will allow you to contribute up to $40k into your retirement plan as a pre-tax deduction. Also if you S-incorporate yourself than you can really take advantage of some deductions. Not to mention incorporating will protect your personal assets from the occasional litigious scumbag patient. GL.

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      • #4
        Most likely an employee. I'm looking at a couple of different jobs right now. A friend of mine becam an attending last year and it was shocking the amount of tax he paid.

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        • #5
          Originally posted by bigsaver View Post
          it was shocking the amount of tax he paid.
          I frequently get CP and SOB whenever I see how much $$$ I pay in taxes every year. Trust me, you will too. The funny part is that most Americans and our government would consider my income very high but yet in reality it's not. After taxes there's not much left IMO.

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          • #6
            Buy a house
            Use a 401k (not the roth- the regular kind)
            have kids
            get married

            all of above reduce taxes paid

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            • #7
              Originally posted by jIM_Ohio View Post
              have kids
              get married

              all of above reduce taxes paid
              Kids may slightly reduce your tax bill, but the cost of the kids will far exceed any tax benefit.

              Getting married is not a good tax strategy. Most tax situations are more beneficial to the unmarried.

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              • #8
                The government's favorite US citizens...DINKS!!!

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                • #9
                  Look into your state's tax free muni bonds. They rate of return is not the best, but anything positive for the next year or so will be better than most market segments.

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                  • #10
                    Buy a house and max your 401K contributions.

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                    • #11
                      Originally posted by moneybags View Post
                      Kids may slightly reduce your tax bill, but the cost of the kids will far exceed any tax benefit.

                      Getting married is not a good tax strategy. Most tax situations are more beneficial to the unmarried.
                      disagree- the tax brackets for married filing jointly are higher than for any other filing status.

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