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.
