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M D N E W S . C O M /// M D N E W S S A N A N T O N I O ■ 2 018 2 1 If the majority of a physician's income comes from his/her medica l practice a nd t he physicia n's t a xable i ncome exceeds $415,000, then the Q BI deduc- tion is severely limited or a ll together disallowed. It may be more beneficial to separate nonmedical income from the medical practice so that there is more of an opportunity for that income to qualify for the Q BI. Some initial ideas to try to qualify for the Q BI deduction include: 1. Have that medical building and expen- sive medical equipment separated into a rental entity to try to have that rental income qualify for the Q BI. This idea, like all the others here, must be further addressed with clarification of the new tax law. 2. Have any income generated from the management of other medical prac- tices, such as debt collection or o£ce support, separated from the medical practice into its own entity for the same possible benefit. 3. Have any employee leasing work/rev- enue separated into a separate entity and use an industry standard markup of the revenue/profit for this service. 4. Increa se deductions of the ¥ medi- c a l p r a c t i c e t o g e t b e l o w t h e $415,0 0 0 t h reshold . Wit h t hat i n mind,¥ reconsider more a gg ressive medical practice retirement plans,¥or use of a hea lth sav ings account or even more traditiona l deductions like¥increasing charitable donations. With the ability to immediately write o all medical equipment purchased, this would be something to consider as well. As we lea rn more about the new ta x law, there will be more ideas that will come for our physicians to consider to tr y to ta ke advantage of the Q BI deduc- tion. We will try to keep everyone posted. As brief ly mentioned before, physi- cia ns operati ng under a reg u la r "C " corporation do not get any opportunity to ta ke¥advantage of the Q BI deduction. The "C" corporation choice of entity is usua lly not a good ta x choice for phy- sicia ns to operate under. Conversion from¥a¥"C" corporation does ta ke plan- ning and ana lysis but can be a good ta x saving move. There is some ta lk that w it h t he¥ new f lat ta x rate of 21 per- cent for "C" corporations, physicia ns shou ld eit her cha n ge t hei r¥ med ica l practice choice of entit y to this t y pe of¥corporation or just keep the current "C" corporation status. Ma ny studies have been done on this idea of the "C" corporation. It is usua lly not a good idea for medica l practices to operate as a "C" corporation as medical practices should retain as¥little cash as¥possible and not invest¥in appreciating investment-type assets. Additionally, the double ta xation from a "C" cor poration (the cor pora- tion pays¥ta xes on the retained income a nd¥ then¥ the sha reholders pay ta x on the corporate dividends as the corpora- tion releases cash to the shareholders) negates the benefit of¥the lower ta x rate at the corporate level. The discussion here is mainly food for thought as the new ta x law needs techni- ca l corrections and much clarif ication as to the intent of the law. The details are likely not to come for many months. Still, it is a lways advisable to reg ularly meet with your ta x advisor to reduce your ta x burden. Jim Rice , CPA , is a shareholder at S o l S c h w a r t z & A s s o c i a t e s P C . He ha s 3 9 years of ex pe r ie n ce in p ublic accounting. In addition to providing business consultation , financial plan- nin g a n d v a r i o u s oth e r a cc o u nt in g services, Rice specializes in income tax planning and consultation . He works with a high concentration of physician practices and high net worth individuals. Contact Rice at 210-384-8000, ext. 112, or jprice@ssacpa .com . ■