Tax Strategies & Health Insurance Options for the 1099 CRNA
Transitioning to 1099 work as a CRNA can be a game-changer for your career and financial future.
In the final part of this three-part series, we aim to help educate CRNAs who are considering the transition to 1099.
In today’s blog post, we focus on the tax concepts and strategies to ensure you maximize the benefits of becoming a 1099 contractor.
- Health Insurance: The First Hurdle
One of the most pressing concerns for CRNAs considering the switch to 1099 is health insurance options, including COBRA, the Affordable Care Act (ACA), and Health Savings Accounts (HSAs).- COBRA allows you to keep your current insurance for up to 18 months after leaving a W-2 position, but coverage can be expensive.
- On the other hand, ACA marketplace plans provide a broad range of coverage options without exclusions for pre-existing conditions. Depending on your income, you may qualify for subsidies to reduce your premium costs.
- An HSA is a tax-advantaged health savings account available if you enroll in a high-deductible health plan (HDHP). It allows you to set aside pre-tax money for medical expenses. Contributions to an HSA can lower your taxable income, and the funds roll over year to year, making it a great option for managing healthcare costs long-term.
- Tax Deductions: Maximizing Your Savings
Maximizing tax deductions is essential for CRNAs transitioning to 1099 work, as they can significantly reduce your tax liability and increase your savings.- Section 179 of the IRS tax code allows you to deduct the full purchase price of qualifying equipment and software purchased or financed during the tax year. This can be particularly useful for CRNAs who need to buy expensive medical or office equipment or vehicles for their practice.
- Home office deductions are another potential area for savings. If you use part of your home exclusively for business, you may be eligible for a home office deduction. This deduction can cover expenses such as utilities, rent, mortgage interest, property taxes, repairs, and maintenance. There are two methods for taking advantage of this deduction. The regular method involves calculating actual expenses related to your home office, while the simplified method offers a flat rate deduction based on square footage.
- Retirement Planning: Securing Your Future
Retirement planning is another crucial piece of the 1099 transition that often gets overlooked. As a self-employed CRNA, you have more control over your retirement savings and the potential to contribute (and deduct) significantly more than you could as an employee. CRNA independent contractors often save for retirement through a SEP IRA or Solo 401(k).- A SEP IRA (Simplified Employee Pension Individual Retirement Account) is a popular choice for self-employed professionals due to its simplicity and high contribution limits. CRNAs can contribute up to 25% of net earnings from self-employment, with a maximum contribution of $69,000 for 2024. SEP contributions are tax-deductible, reducing your taxable income for the year. However, a SEP IRA prohibits employee contributions.
- Another option for retirement saving is the Solo 401(k). As both employer and employee, you can contribute up to $23,000 as the employee portion for 2024 (or $30,500 if you’re over 50) into your Solo 401(k). Additionally, as the employer, you can contribute up to 25% of your net self-employment income, bringing the total contribution to $69,000 (or $76,500 if over 50). Contributions to a Solo 401(k) reduce your taxable income. You can also choose between a traditional (pre-tax) or Roth (after-tax) Solo 401(k), allowing for tax-free withdrawals in retirement if using the Roth option.
- Qualified Business Income (QBI): A Hidden Gem
Introduced in the Tax Cuts and Jobs Act of 2018, QBI allows eligible self-employed individuals to deduct up to 20% of their qualified business income. However, there are income thresholds and phase-outs to consider, especially for service-based professions like CRNAs. Financial advisors and tax professionals can provide you with actionable tips on how to manage your income to take full advantage of this deduction.
Transitioning to 1099 status as a CRNA offers numerous benefits, but it requires careful planning and a thorough understanding of tax laws and financial strategies. We hope this three-part series has helped you understand what’s most important and where you need to focus if you decide that 1099 work is best for you.
Are you a Resident or CRNA looking to transition into independent practice? The AANA and Beyond the Mask are here to help you thrive as your own boss!
Introducing the 1099 CRNA Institute – taught by ‘Beyond the Mask’ hosts Jeremy Stanley and Sharon Pearce. This comprehensive educational series provides detailed guidance on business structure, legal and tax implications, and financial management tailored specifically for 1099 CRNAs.
Visit AANA.com/1099 to learn more and take the first step toward your new future.
The opinions voiced in this material are for general information only and are not intended to provide specific financial or tax advice or recommendations for any individual. Please consult with a financial advisor or tax professional for a more information based on your specific circumstances.
Investment Advice offered through Private Advisor Group LLC, a Registered Investment Advisor.