Many doctors are high earners and thus pay the top tax rate. Accordingly, the interest of doctors to save taxes is also correspondingly great. There are many different options that are suitable for both employed and resident physicians. Other methods, on the other hand, are only useful for one of the two groups mentioned. For example, training costs are relevant for both groups because they are eligible either as special expenses or as deductible operating expenses or as advertising costs. Medical care centers in the legal form of a GmbH can also be attractive. They offer the opportunity to accumulate profits. Compared to a freelance sole proprietor, the GmbH pays less tax on its profits. In this way, for example, medical devices can be financed and purchased more quickly. But also a society under civil law can make sense for a community of practice.

Although there are many medical professions, hardly one is close to that of doctors in terms of compensation. On the one hand, this is certainly due to the enormous responsibility that doctors bear in their work. On the other hand, however, also the financial and time expenditure alone when studying. Furthermore, many doctors work far more than 40 hours a week. Some manage this easily in three days, more regularly than exceptionally. If you manage to set up your own practice later, usually many more and often even very high costs for the establishment and operation of the medical equipment are added. Of course, doctors can then expect to honor all this. The income is correspondingly high in many cases. Consequently, many doctors also wonder how they can save taxes.

In doing so, we are slowly getting into the topic underlying this contribution. But we have to distinguish between several starting situations right at the beginning. On the one hand, there are doctors who work in an employee relationship, for example in a hospital. On the other hand, one should also look at resident doctors and their possibilities to save taxes. There are both possibilities that offer both groups a tax advantage and those that are advantageous only for one of the two groups. That is why we have chosen five tips here that offer doctors of both groups the opportunity to save on taxes.

In fact, our first tip is aimed at medical students. The reason for this is that you can also deduct the study costs tax. However, a distinction must be made between initial training and further training.

3.1.1. Special limited expenditure for initial vocational training costs

In the case of an initial training, you can deduct only part of the costs associated with it. Furthermore, the approach is limited to an annual limit of EUR 6,000. On the other hand, all costs that extend beyond this are not taken into account. These are special expenses which reduce the total amount of income by the respective amount. This is because initial training costs are partly considered to be private living costs; and private expenses enjoy no other tax advantage. However, this restriction can be circumvented if the costs of initial training arise in connection with an employment relationship. Then you can set the costs as advertising costs in full.

3.1.2. Full deductible and presentable training costs

However, if you already have completed vocational training in a recognized profession, then the possibilities for tax saving for prospective doctors already look much better. Because in this case, the training costs can be set tax-reducing either as advertising costs (for employed doctors) or as business expenses (for resident doctors). In addition to the costs directly associated with the training, this also includes accompanying costs for travel, specialist literature or equipment. It may be particularly interesting for many doctors that you can also use the costs to participate in medical symposia and similar conferences to save taxes. But one must strictly distinguish between professionally initiated and private costs. Under certain circumstances, therefore, one must also be able to prove the allocation of costs to the financial administration.

3.1.3. Practical application

Our first tip is therefore that you first learn a profession that is recognized as such when considering advertising costs. Only in a second step should the significantly more expensive medical studies follow, so that these costs can be set in full tax. The advantage over the special expense deduction is that you basically write annual losses. These losses – one usually has far less income than expenses during the study, but at least hardly any significant positive income – are carry-forward. This means that the tax office remembers these losses for the future. After studying, you can then offset the professionally earned income with these losses in order to reduce the income tax.

But you should proceed cleverly, instead of immediately exhausting all the losses in order to pay no taxes at all. In the long term, it is often more advantageous to bring the personal tax rate to a tolerable level than to remain tax-free in the short term. However, one should always consider all aspects that could influence this.

Our second tip seamlessly follows the first. If medical students successfully pass their state examinations, then they are about to enter the profession. But you can save taxes by cleverly choosing the time when you start a job as a doctor. Suppose you earn EUR 5,000 a month and you start working in November, then you earn a total of EUR 10,000 by the end of the year. The basic personal allowance, which can be added to the annual income, is also about EUR 10,000. It is irrelevant for the recognition of the basic allowance whether one actually works only one or up to twelve months of the year. So young doctors who only start working in November of a year can basically save income tax in the first year of employment. The savings are in the range of about EUR 2,000. As a result, the first and second gross salary basically becomes the net salary.

Even if you start working during the year at another time, you may benefit from this circumstance. However, the advantage lies only in the lowering of the effective tax rate compared to the one that would be applied if you had worked throughout the year.

While the previous tip on tax savings was addressed to employed doctors, the third tip is interesting for resident doctors. Because if you want to establish a practice, the choice of legal form plays a major role in future taxation.

3.3.1. Possible legal forms

On the one hand, you can set up and run a medical practice on your own. In this case, one is considered a freelance sole proprietor. It is also possible to set up a medical practice together with other doctors. For this purpose, in particular the company civil law (GbR) serves as a basic legal form. But there is also another alternative, namely the medical care center (MVZ for short). In this case, you have the choice between a partnership, a registered cooperative or a GmbH.

If the choice of legal form falls on a sole proprietorship or partnership, the income from the operation of the practice flows directly to the participating doctors. Ergo, taxation also takes place at her personal level and consequently also at her personal tax rate. However, since we assume that their profits can sometimes reach considerable levels, one has to assume the top tax rate. The so-called wealth tax may even apply.

3.3.2. Tax advantages of the GbR as a legal form for medical practices

The advantage of a GbR or a sole proprietorship for health care services is that these are exempt from trade tax and sales tax.

3.3.3. Tax advantages of MVZ-GmbH as a legal form for medical practices

However, if you plan to found an MVZ as a GmbH, then you can use it as a kind of savings box. Although MVZ-GmbH pays 15 % corporation tax on its profit and about the same amount of trade tax, as long as the remaining profit remains in the GmbH instead of being distributed to the shareholders, there is no further tax. Thus, MVZ-GmbH can save and use the accumulated profit for investments, for example for new medical devices. As a result, more funds are available for such projects than if a doctor had to contribute them in the case of a partnership or a sole proprietorship from their profit, which is taxed at around 50%.

This brings us to another tax advantage of the GmbH for physicians. Because MVZ-GmbH can also pay the shareholder-managing directors a general salary. Of course, this should also be external to avoid an approach as a hidden profit distribution. Because the managing director salary can ideally reduce the taxable profit significantly as a deductible operating expense.

Suppose a doctor establishes an MVZ in the legal form of a GmbH. Let us also assume that the income is quite high in terms of size, so that in addition to personal needs, there were still funds left with which doctors could invest in asset building, for example in real estate. Then they would basically have to pay out the entire profits of the GmbH to be able to use the money as capital. However, this would also result in a capital gains tax of 25 %, so that the capital actually available for investments would only comprise about half of the original amount. Surely it would be an advantage if a way could be used that would also secure the 25% capital gains tax on investments, right?

And it actually exists. Thus, one takes away from the distribution of the profit accumulated in the MVZ-GmbH. Instead, she transfers this amount as a loan on market terms to the doctor. As a result, he or she is able to invest all their money in building up their wealth.

Normally, a tax deduction ban applies to fines. So it is regulated at least according to § 4 paragraph 5 number 8 EStG. But there is also an exception. Because if you started the violation of the law that led to the fine in order to obtain an economic advantage, then you can deduct the fine from the tax.