Cardiologist Saves $332K in Taxes

Tax Planning Results at a Glance

These results reflect this client's specific financial situation and are not typical. Tax savings depend on individual income, filing status, entity structure, investment capacity, and other factors. Past results do not guarantee similar outcomes. This is not tax advice. Consult a qualified professional before making tax planning decisions.

The Situation

Michael is a 35-year-old cardiologist, six years out of residency, carrying a mountain of student loan debt. He made a deliberate decision: take locum tenens assignments in rural Georgia, earn over $1 million a year, and do it for three years straight. His plan was simple. Pay off the student loans. Build a nest egg. Then open his own practice.

The income was there. The problem was the tax bill.

As a 1099 contractor earning over $1 million, Michael faced federal income tax of $273,442, state tax of $49,397, self-employment tax of $48,620, and an additional $6,062 in net investment income tax. His total tax liability came to $377,521, an effective rate of 37.7%. Nearly four out of every ten dollars he earned went straight to taxes. At his rate, his three-year plan to pay off debt and save for a practice was going to take a lot longer than three years.

What We Did

Michael came to us looking for a way to keep more of what he was earning. We started with a full review of his tax situation, his income structure, and his short-term and long-term goals.

The primary approach was a tax-efficient business investment. Because Michael operates as an independent contractor, we had room to structure things in a way a W-2 employee simply cannot. As long as Michael actively participates in the investment for at least 100 hours per year, the resulting losses are treated as active, not passive. The distinction matters. Passive losses face strict limitations on what they offset. Active losses do not. And because Michael files married filing jointly, his excess business losses are not capped unless they exceed $626,000 under the Section 461(l) limitation. His losses fell well within the threshold, so the full deduction applied.

We paired the investment approach with ongoing tax planning support and multiple meetings throughout the year to stay ahead of any changes in his income or assignment locations.

This was not a set-it-and-forget-it approach. Locum tenens work means income shifts quarter to quarter. We stayed in regular contact to adjust the plan as the year unfolded.

The Results

Michael's total tax dropped from $377,521 to $44,627. A savings of $332,894. His effective tax rate went from 37.7% down to 4.5%, a reduction of over 33 percentage points.

The approach did require Michael to invest $110,437 of his own capital. The capital is not gone. The investment earns approximately 12% per year, and at the current rate, Michael should recover his full invested capital by year six. After accounting for the investment and our $28,000 planning fee, his net savings came to $194,457. For every dollar he spent on our planning fee, he saved nearly $12 in taxes.

The math changed entirely. With the tax savings, Michael will pay off his student loans within a year. A bigger nest egg for the practice. And real momentum toward the life he's building.

What Michael Had to Say

Key Takeaways