008 - Your 401k and Tax Deductions

My Awesome Webhost: Kajabi (Free 30 Day Trial)

This episode of Dream DPC covers three key financial topics for direct primary care (DPC) practice owners: 401(k) plans, business deductions, and creating a charity to optimize finances and reduce tax liabilities.

1. Maximizing a 401(k) as a DPC Owner 

 • Unlike traditional employment, where the employer contributes to a 401(k), a DPC owner plays both roles—employee and employer—allowing for higher contributions.

 • The IRS allows elective deferrals up to $23,000 in 2024 and $23,500 in 2025 (higher limits apply for those 50+ with additional catch-up contributions).

 • Business owners can contribute up to 25% of compensation as employer contributions, bringing the total potential contribution to $69,000 in 2024.

 • This strategy is beneficial once a DPC practice becomes financially stable, allowing the owner to catch up on retirement savings.

2. Common Tax Deductions for a DPC Practice 

 • Software & Subscriptions: EMR, QuickBooks, Zoom, Kajabi (website hosting), RingCentral (business phone)

 • Phone & Internet: Both the device and the plan

 • Travel & Mileage: Business-related driving

 • Marketing & Advertising: Facebook ads, website maintenance

 • AI Tools: AI-powered note-taking software

 • Medical Supplies & Lab Fees: Payments to Quest Diagnostics, Amazon business purchases

 • Insurance: Business insurance, malpractice insurance

 • Education: Books, courses, and conferences

 • Business Meals: Meeting-related expenses

3. Creating a Charity for Tax Benefits and Impact 

 • A charity (501(c)(3)) can be a powerful tool for reducing taxable income while supporting a cause.

 • There are two main types:

 • Private foundations: These are controlled by a family or small group and have less public scrutiny but more operating restrictions.

 • Public charities: More transparent, often benefiting from more public donations.

 • DPC owners can contribute up to 30% of their income to a charity, lowering their taxable income.

 • The charity must distribute 5% of its assets annually to its mission (e.g., medical debt relief, healthcare access, jiu-jitsu promotion).

 • Founders can pay themselves a salary from the charity, but IRS guidelines dictate reasonable compensation based on the organization’s size.