As entrepreneurs, doctors are subject to certain professional restrictions that stand in the way of tax optimization. For example, doctors as individuals cannot set up a GmbH. Therefore, we now want to give some examples of how doctors can save taxes, at least privately. On the one hand, we recommend the Family GbR for the rental of real estate. Furthermore, we point out the special tax advantages that listed properties offer. On the other hand, family foundations may also be of interest to doctors. For example, with a family foundation, you can rent expensive equipment to your own practice and save taxes. We paid particular attention to asset succession in our presented design recommendations. There is considerable potential for tax savings here too.

Doctors belong to a professional group whose representatives often earn a high income. Although they also have to pay taxes at the top tax rate, in the end there is often still more than is necessary for an upscale standard of living. Therefore, it is no wonder that doctors invest their surpluses in other assets and continuously build up assets.

But if doctors have little opportunity to save taxes when taxing their professional income, they should at least have to pay as little tax as possible on their other private income. After all, as far as their entrepreneurial income is concerned, they are already disadvantaged by the restrictions imposed on them by professional law in the design of their entrepreneurial legal form. Let us make their lives easier in this regard. This is why in this article we show how doctors can save private taxes.

In order to optimize the scope of this introduction to the taxation of non-freelance income of doctors, we highlight two areas.

On the one hand, our article will deal with designs around the taxation of real estate. Because with a monthly income of several thousand euros gross, the probability is great that doctors are interested in the acquisition of real estate. Naturally, the home enjoys priority. However, if such a private property already exists, others often follow, the doctors then rent.

On the other hand, we would like to draw the attention of our readers to the many benefits of a family foundation. Because a family foundation can also be the perfect solution or supplement to other questions beyond some tax advantages. Even with regard to the rental of real estate, special opportunities are revealed.

Let’s start with the more familiar topic for many people, namely the rental of real estate. Right at the beginning, the question arises whether you want to include commercial real estate in the considerations, or whether you prefer residential real estate. After all, some special knowledge is required when renting a commercial property. Furthermore, commercial rental is usually accompanied by sales tax aspects. But since doctors rarely have a lot of time, the sales taxation as a side factor to the rental could certainly mean a considerable time extra effort, which doctors then probably want to save. Even if they leave the financial accounting to their tax consultants, they must at least initially inform themselves about the various conditions surrounding sales tax when renting commercial real estate. But you have to weigh carefully in advance, because commercial real estate also have their tax charms.

Doctors, on the other hand, have it much easier with the rental of residential properties. Since there is no sales tax, only the taxation of rental income remains in the context of the assessment for income tax. Therefore, we now look at some selected ways that doctors can save private taxes when renting out residential properties.

On the one hand, the establishment of a family GbR offers itself. If doctors already have a certain property portfolio in their assets, then this is a favorable approach to benefit from an increased depreciation volume for tax purposes on the one hand, but also to optimize asset succession on the other hand. For this purpose, they first establish a family GbR. The advantage here is that this is practically formless and thus possible very quickly. Partners are on the one hand the parents, but on the other hand also their children. The parents then sell their properties to the Familien-GbR. In return, instead of paying the highest possible but realistic purchase price, they receive a purchase price claim. You can also consider this as a kind of loan. This actually also causes interest costs, which the family GbR has to bear. In addition, the Familien-GbR pays off this purchase price claim on an ongoing basis with its rental income.

The tax advantage is now that the parents receive the repayments tax-free. In addition, parents now have to pay only 25% capital gains tax on their interest instead of the top tax rate of 42% on their rental income. The shareholders of Familien-GbR, on the other hand, benefit from the tax deductibility of interest costs as well as from depreciation. The latter is even particularly advantageous through the sale of the real estate, because now the amount of the depreciation depends on the currently increased real estate values, which are of course taken into account in the purchase price.

Almost as a mere side effect one can understand the inheritance- and gift tax-free transfer of real estate assets to one’s own children. This also saves taxes later.

The second tax design model that we would like to recommend to doctors who intend to purchase real estate is bringing listed properties into the focus of interest. Because listed properties have the advantage that they are tax heavily subsidized. It is true that a number of special requirements must be met with regard to the preservation of the monument, but this is often an essential intention of people who are interested in such ancient or otherwise special buildings. In addition, this can also be used financially advantageously when determining the rent. However, the tax advantage is due to the significantly increased depreciation. This allows you to recover the purchase price and any construction measures via the saved taxes from the state faster. Consequently, the purchase of the next property is much faster realizable than with ordinary real estate.

We have reserved the second part of our recommendations for the family foundation. Certainly, foundations are known in Germany primarily in their charitable form. In addition, there is also the family foundation, which should provide for the needs of precisely defined persons in advance, usually the family members of the founders. We now want to make use of this.

First of all, we can duplicate the design we presented earlier with the Familien-GbR with a family foundation. Instead of the family GbR, the family foundation comes here. In this way, you can save taxes by converting rental income into more tax-advantageous interest income, as well as receive regular tax-free income via the repayment.

But here, too, tax-optimized asset succession comes first. Because a foundation is a dedicated, independent asset that knows no owners. Therefore, there is no inheritance tax on them, because a foundation is designed on a permanent basis and thus cross-generational. That is why the legislature has introduced a substitute inheritance tax in Germany, which leads to a tax on the assets of foundations every 30 years. For this reason, we recommend setting up a family foundation in Liechtenstein to avoid the substitute inheritance tax. Because there a substitute inheritance tax or a comparable tax is unknown.

Even more interesting for doctors who want to save taxes with a family foundation is the acquisition of all economic goods of their own practice. They then lease it to the practice and receive correspondingly high rental payments. The advantage here is on the one hand that the rent reduces the taxable profit of the practice, so that doctors can save privately on their taxes. On the other hand, the family foundation can also make write-downs here in order to optimize its own profit and thus also its taxes. This is particularly interesting in the case of expensive equipment, such as computed tomographs or the equipment of eye doctors.

In addition to renting the practice facility, you can also buy cars through the family foundation and rent them to the doctors privately, because this also helps save taxes. This is because, on the one hand, a car generates depreciation volume and, on the other hand, can be sold tax-free at any time as an object of daily use. The latter means that any profit from the sale of the car for the family foundation remains tax-free. So this design model is particularly suitable for high-quality cars, whose value, contrary to the trend, increases instead of decreases.

Of course, in addition to the recommendations presented here, there are also many others that should be of interest especially for doctors who want to save taxes privately. For example, considerations could be included here as to how the design with the family foundation could be extended to a corporation. In any case, doctors at private level have a much broader range of tax options available than at entrepreneurial level. And they should therefore use these opportunities accordingly.