Andrew Schrage of Money Crashers discusses what orthopedic surgeons can expect after the Bush Tax Cuts expire and the smartest financial moves heading into next year.
Q: What will be different for spine surgeons after the tax cuts expire?
Andrew Schrage: One thing that will be different for spine surgeons should the tax cuts expire is that they will pay more in Medicare payroll taxes if they earn more than $200,000 as an individual or $250,000 if they file jointly with a spouse. They could also face a significant reduction in Medicare payments depending upon how the fiscal cliff issue is resolved. This reduction is normally averted because of annual legislation, but it's not so clear that this legislation will be part of the fiscal cliff fix. If it isn't, Medicare payments for spine surgeons and all practitioners could decrease by as much as 25 percent.
Q: What are the smartest moves for spine surgeons to consider before the Bush Tax Cuts expire?
AS: One idea to consider right now is to reshuffle your investment portfolio. With the looming tax hikes, you want your investments that are most tax efficient, such as stocks and bonds that don't pay dividends, in taxable accounts. Investments that have a history of paying out significant dividends are best placed in accounts that are tax-deferred. If a traditional IRA is part of their portfolio, spine surgeons should consider converting it to a Roth IRA. That way, they would be paying taxes on their account now instead of in the future, when rates are almost sure to be higher. Gifting money to relatives can also decrease a spine surgeon's tax burden, as long as it's beneath the $13,000 limit for 2012.
Q: What impact will new tax rates have on spine surgeons and their practices?
AS: The new tax rates could very easily cause spine surgeons to raise their prices. Additionally, there is also a new tax on medical devices that could cause spine surgeons to raise their rates even more, though it's still unclear which medical devices will be subject to the new tax.
On a more personal level, the new tax rates could cause them to shift their investing perspective. Generally, surgeons have enough disposable income to put their money in more illiquid investments, namely venture capital. With the coming tax increases, spine surgeons may be more likely to invest in liquid assets in case their income is negatively affected as a result of the tax increases.
Q: How can they lighten the blow from potential new tax rates in the future?
AS: Spine surgeons should look to increase their compensation as much as possible this year. For instance, take year-end bonuses before December 31 if possible. Another idea is to defer expenses that may have been paid at the end of this year to the beginning of 2013. Surgeons can also delay the purchase of new equipment until next year in order to reduce taxable income.
Q: Where can spine surgeons turn to optimize their financial situation?
AS: The best bet for spine surgeons looking to optimize their financial situation post-fiscal cliff is to enlist the help of a certified financial advisor. These professionals can offer specific and actionable advice on the exact things spine surgeons can do now and into the future to weather the storm. The best place to look for one is the Financial Planning Association website.
More Articles on Orthopedics:
10 Points on Orthopedic Surgeon Compensation
6 Ongoing Challenges for Spine Surgeons
50 Spine Surgeons on the Move in 2012
Andrew Schrage: One thing that will be different for spine surgeons should the tax cuts expire is that they will pay more in Medicare payroll taxes if they earn more than $200,000 as an individual or $250,000 if they file jointly with a spouse. They could also face a significant reduction in Medicare payments depending upon how the fiscal cliff issue is resolved. This reduction is normally averted because of annual legislation, but it's not so clear that this legislation will be part of the fiscal cliff fix. If it isn't, Medicare payments for spine surgeons and all practitioners could decrease by as much as 25 percent.
Q: What are the smartest moves for spine surgeons to consider before the Bush Tax Cuts expire?
AS: One idea to consider right now is to reshuffle your investment portfolio. With the looming tax hikes, you want your investments that are most tax efficient, such as stocks and bonds that don't pay dividends, in taxable accounts. Investments that have a history of paying out significant dividends are best placed in accounts that are tax-deferred. If a traditional IRA is part of their portfolio, spine surgeons should consider converting it to a Roth IRA. That way, they would be paying taxes on their account now instead of in the future, when rates are almost sure to be higher. Gifting money to relatives can also decrease a spine surgeon's tax burden, as long as it's beneath the $13,000 limit for 2012.
Q: What impact will new tax rates have on spine surgeons and their practices?
AS: The new tax rates could very easily cause spine surgeons to raise their prices. Additionally, there is also a new tax on medical devices that could cause spine surgeons to raise their rates even more, though it's still unclear which medical devices will be subject to the new tax.
On a more personal level, the new tax rates could cause them to shift their investing perspective. Generally, surgeons have enough disposable income to put their money in more illiquid investments, namely venture capital. With the coming tax increases, spine surgeons may be more likely to invest in liquid assets in case their income is negatively affected as a result of the tax increases.
Q: How can they lighten the blow from potential new tax rates in the future?
AS: Spine surgeons should look to increase their compensation as much as possible this year. For instance, take year-end bonuses before December 31 if possible. Another idea is to defer expenses that may have been paid at the end of this year to the beginning of 2013. Surgeons can also delay the purchase of new equipment until next year in order to reduce taxable income.
Q: Where can spine surgeons turn to optimize their financial situation?
AS: The best bet for spine surgeons looking to optimize their financial situation post-fiscal cliff is to enlist the help of a certified financial advisor. These professionals can offer specific and actionable advice on the exact things spine surgeons can do now and into the future to weather the storm. The best place to look for one is the Financial Planning Association website.
More Articles on Orthopedics:
10 Points on Orthopedic Surgeon Compensation
6 Ongoing Challenges for Spine Surgeons
50 Spine Surgeons on the Move in 2012