You’ll find answers about filing taxes jointly or separately, harnessing real estate for tax savings, getting the most from your HSA, making backdoor Roths work, understanding Roth conversions, and taking advantage of mega backdoor Roth strategies. Each tip speaks to your profession’s reality, helping you avoid the most common pitfalls and seize more opportunities.

What’s Inside AMA Volume 8

Here’s a quick peek at what this session covers:

• Married filing separately, and when it makes sense
• Rental real estate tax perks and real estate professional status (REP)
• Health Savings Account (HSA) contribution rules and misconceptions
• Backdoor Roth and Roth IRA conversion strategies
• How employer retirement plan options work for your backdoor Roth
• The ins and outs of mega backdoor Roth contributions

Married Filing Separately: When Does It Make Sense?

Most married couples avoid filing taxes separately. It often leads to a larger tax bill and fewer tax breaks. But if you’re handling student loans—especially under an Income Driven Repayment (IDR) plan—married filing separately (MFS) might be worth a hard look.

Why Might Married Filing Separately Help with Student Loans?

Physicians juggling big student loans often use Income-Driven Repayment (IDR) plans. The magic number here is your Adjusted Gross Income (AGI). That’s the baseline for calculating your monthly student loan payments. Filing separately can shield your spouse’s income from being counted, dropping your AGI, and reducing your payment.

Example: If you’re working in a hospital and your spouse is a stay-at-home parent, filing separately means your income alone sets the payment. For many high earners, that can make loan payments drop by thousands each year.

The Catch: Increased Tax Bill with MFS

MFS creates a new problem: The IRS usually gives married couples who file together more tax perks. Filing separately often means higher taxes—sometimes a $1,000 increase or more per year. The trade-off becomes whether the student loan monthly payment drop outweighs the extra taxes. It’s a balancing act. If you save $5,000 on loans but pay an extra $1,000 in taxes, MFS could be a win.

Special Complexity for Community Property States

Some states force you to split income down the middle, even when filing separately. Community property rules can either help or hurt, depending on both partners’ incomes.

Scenarios:

1. Physician + Stay-at-Home Spouse:

   • $400,000 income for the physician, $0 for spouse.
   • After income splitting, both show $200,000.
   • This could lower the breadwinner’s AGI, slashing student loan payments.

2. Physician + Nurse (or Another Earner):

   • $400,000 for the physician, $50,000 for spouse.
   • Income split: $225,000 each.
   • Now the non-physician spouse reports much more income, possibly raising their taxes and hurting the combined outcome.

You need to map this to your own life, especially if both partners earn money.

Get Professional Help to Run the Numbers

The math gets complex fast. The best move is running both scenarios (joint and separate) with an accountant familiar with student loans and physician taxes. Worksheets can lay out the results side by side—sometimes the answer isn’t obvious until you see the hard numbers.

Professional advice and double-checking the numbers is essential. Never assume the right choice without seeing the full picture.

Real Estate and Physician Tax Savings

Many physicians eye real estate to cut their tax bills and build long-term wealth. You have a few main ways to put money into property:

• Direct rental ownership
• Real estate syndications
• Real Estate Investment Trusts (REITs)

This session primarily discusses direct ownership, which typically offers the strongest tax benefits for high earners.

Depreciation: The Tax Superpower in Rental Properties

When you buy a rental property, the IRS lets you “depreciate” (spread) the cost over 27.5 years. This depreciation is a paper loss, meaning you get a deduction even if your property grows in value.

How it Works:

1. Buy a rental property and bring in $12,000 in rent over the year.
2. The IRS allows $15,000 in annual depreciation.
3. When you do your taxes, you report $12,000 in income, but the $15,000 deduction wipes it out.
4. Your taxable rental income is now zero for the year.

That’s the core reason why rents can land in your pocket with little to no tax, especially early on.

Schedule E and Real-World Rental Taxes

Schedule E is the IRS form for reporting rental income. It’s more complex than our example. Beyond depreciation, you’ll include deductions like:

• Maintenance and repairs
• Insurance premiums
• Property management fees
• Advertising
• Mortgage interest

Depreciation is often the biggest hitter, but keeping records on everything helps maximize your deductions.

Direct Ownership vs Syndications and REITs

If you own the property outright, you keep more direct benefits. Syndications (group purchases) and REITs (stock-like real estate investments) may offer steady income and easier diversification, but rarely provide the same level of tax write-offs to individual investors. You lose a bit of control and some personal tax benefits.

Rental Real Estate: Passive Income, or Not?

Rental properties are not truly passive, especially when you start. Even with a property manager, you remain responsible for decisions, cash flow, and surprises.

Common headaches:

• Finding and screening tenants
• Chasing rent checks
• Dealing with vacancies
• Handling repairs at all hours

The promise of “passive income” glosses over these realities. Real estate can be a great wealth builder, but expect work, stress, and occasional setbacks.

Real Estate Professional (REP) Status: A Tax Tool for the Dedicated

The IRS lets you treat real estate as a full-time career (for tax purposes) if you meet certain standards. This is called Real Estate Professional (REP) status.

How REP Status Benefits Your Family

If you (or your spouse) qualify as a real estate professional, your rental losses can offset the active income of the higher-earning partner. Here’s why this matters.

Using our earlier example of $12,000 rental income and $15,000 in depreciation, normally, you’d carry the extra $3,000 loss forward. With REP status, you can use that extra loss to reduce your partner’s doctor salary on your taxes. This can help drop your entire household tax bill.

What It Takes to Qualify for REP Status

• It must be your real, ongoing job—not just a hobby.
• The IRS expects at least 750 hours per year, and more time spent on real estate than any other job or business.
• Usually, you’ll own multiple rentals or larger multifamily buildings.
• You need to keep detailed logs and records of time spent and activities performed.

Checklist to qualify:

• At least 750 hours/year in real estate activities
• More business time in real estate than any other job
• Material participation in managing properties (not just hiring a property manager)
• Strong documentation

The Hard Parts: Workload and Risk

REP status can bring big tax savings, but it isn’t for everyone. You’ll manage more headaches than passive investors—think broken water heaters at midnight, bad tenants, or months without steady rent. If you just want hands-free, set-and-forget investing, REP status likely won’t fit your lifestyle, no matter the tax perks.

You need time, patience, and a strong stomach for the ups and downs of property management.

Health Savings Accounts (HSAs): Limits and Pitfalls

Know Your Limits: HSA Contributions in 2025

For tax year 2025, the maximum family HSA contribution is $8,550. Even if both spouses have separate HSAs (through different workplaces), together you can’t go above this number. You can split up the contributions however you want, but keep a close eye on the total.

If you combine both accounts, make sure you’re not accidentally overfunding and triggering penalties.

Do Health Insurance Premiums Count as Qualified HSA Expenses?

Most people expect their health insurance premiums to be “qualified” expenses for HSA withdrawals. Not so fast. The IRS generally excludes health insurance premiums, meaning you can’t use HSA funds tax-free to pay for them.

There are only a few exceptions, like COBRA continuation coverage or certain retiree health plans. For most people, regular monthly premiums won’t count.

Watch Out for HSA Myths

It’s easy to hear about tactics like the “stealth IRA,” where you collect years of receipts and pull out a lump sum from your HSA tax-free. Remember, only qualified medical expenses count. Health insurance premiums rarely make the list, so double-check before counting on that as a strategy.

Roth IRA and Backdoor Roth: What Physicians Need to Know

The SIMPLE IRA Problem with Backdoor Roths

Backdoor Roths give you a way to put after-tax money into a Roth IRA, even if your income blocks you from direct Roth contributions. But having a balance in a SIMPLE IRA, SEP IRA, or Traditional IRA at year-end can trigger the Prorata rule—which taxes part of your backdoor Roth conversion.

Bottom line: If you have a SIMPLE, SEP, or traditional IRA, the standard backdoor Roth strategy won’t work as planned unless the balance is zero by the end of the year.

Employer Plans That Affect the Backdoor Roth

Many people miss that employer plans labeled as SIMPLE or SEP IRAs are part of this calculation. Traditional IRAs are obviously counted, but so are:

• SIMPLE IRAs
• SEP IRAs
• Any regular traditional IRA you hold

401(k)s, 403(b)s, and similar workplace accounts do not count for this rule.

Planning Your Next Steps

If you have a SIMPLE or SEP IRA, rollover or conversion options exist, but the rules get tight. Talk with an advisor to see if you can move assets to a 401(k) or roll them out to avoid the backdoor Roth snag. Planning ahead is key, since fixing the situation after year-end is usually too late.

Roth Conversions in Retirement: When to Make the Move

What Is a Roth Conversion vs a Backdoor Roth?

A Roth Conversion means moving money from a pre-tax IRA to a Roth IRA. You pay taxes on the conversion amount now, but then the money grows tax-free, with no required minimum distributions (RMDs) later.

A Backdoor Roth is a two-step process that allows post-tax funds to be transferred into a Roth account without direct eligibility. It’s tax-neutral if done right. A Roth conversion is a deliberate tax event to gain future advantages, usually done after you retire.

When Should You Consider Roth Conversions?

There’s a sweet spot for many high earners: After retirement, but before RMDs and Social Security payouts ramp up (usually between your retirement date and age 70–75). During these years, you might have your lowest taxable income in decades. Converting IRA funds now fills low tax brackets, shrinks your future RMDs, and lets more money grow tax-free.

If done right, the savings over your lifetime can be massive.

How Roth Conversions Cut Taxes Over Time

You’re moving money from an account that will require taxable withdrawals (with increasing RMDs as you age) to one that never forces withdrawals and offers tax-free growth. This lets you control your own tax rates and legacy plans for heirs or charitable giving.

For Deeper Insights on Roth Strategies

If you want the nitty-gritty on why pre-tax contributions with later Roth conversions often make more sense for high earners, check out the linked video and blog posts on pre-tax vs Roth strategies. There’s power in holding off—and maximizing that window—for conversions.

Mega Backdoor Roth IRA: Going Beyond the Basics

What Is the Mega Backdoor Roth?

Some employer retirement plans allow after-tax contributions on top of normal salary-deferral (pre-tax or Roth) limits. The regular employee pre-tax cap sits at $23,500 for 2025. With the right plan, after-tax additions and employer matches can push you up to $70,000 total in a single year.

If the plan allows, those after-tax contributions can then be converted to Roth—either inside the plan or out to a Roth IRA—creating a much larger “backdoor” into Roth savings.

How Employer Contributions Affect Your Cap

If your employer is generous with matches and profit sharing, those numbers eat into your $70,000 cap. When the company fills that bucket, there’s little or no room left for your own after-tax contributions. If the employer adds less, you can top off with after-tax amounts to maximize that annual limit.

• Employer adds $60,000 — you can only add $10,000 after-tax.
• Employer maxes out $70,000 — you can’t add any more, but that’s a good “problem” to have.

Plan rules differ, so always verify what your workplace offers.

Know Your Plan: Not All Mega Backdoor Roths Are Created Equal

Some employers don’t allow after-tax contributions. Others let you make them, but don’t allow in-plan Roth conversions or prompt rollovers to a Roth IRA. Understanding your plan’s rules is crucial before banking on a mega backdoor Roth strategy.

Review your plan documents or schedule a chat with HR before setting up after-tax contributions.

Wrapping Up: Key Takeaways and Next Steps

Let’s recap the essentials:

• Married Filing Separately might only make sense for student loan repayments, and only after running the numbers.
• Investment real estate can save you big at tax time if you understand depreciation and, for the truly ambitious, REP status.
• HSAs provide valuable tax relief, but know the real contribution limits—and that most insurance premiums don’t count as qualified expenses.
• Backdoor Roth IRAs are powerful, but not if you hold any SIMPLE, SEP, or traditional IRAs at year-end.
• Roth conversions after retirement can open a golden window for tax savings, especially before RMDs begin.
• Mega backdoor Roth opportunities depend on your employer’s plan and matching setup.

Every tip above is an answer to questions real physicians and high-income professionals have asked again and again.

These strategies aren’t just academic—they drive real savings for real people. The more you know, the better choices you can make for your family and your future.

Remember, your situation calls for personalized attention. Always verify your numbers and, when in doubt, consult a tax professional with experience working with physicians. You work hard for your money; let the right strategies help you keep more of it.