Tax Deductions Self-Employed CRNAs Should Know in 2021

Tax season has officially started, which often provokes groans and phone calls to your tax professional. As a CRNA, you hopefully have a tax minimization strategy in place to help you legally reduce your overall tax liability. However, beyond your year-round strategies, make sure you familiarize yourself with tax deductions for which you may qualify when it comes time to file your return.

There are several tax breaks available if you’re a 1099/freelance CRNA or the owner of a CRNA business. Knowing what write-offs you can claim may help you save more. Here’s a look at a few tax deductions you may be able to claim.

1. Retirement Plan Contributions

As a CRNA freelancer or business owner, you have a number of options for retirement planning, including opening a SEP IRA, starting a Uni-K or solo 401(k) plan, or setting up a defined benefit plan. Not only does this help you save for retirement, but can also save tax dollars. The pre-tax funds you contribute into your retirement account this year will reduce your income and subsequently your tax liability.

For a Uni-K or solo 401(k) plan, you can contribute up to $19,500 per year (or $26,000 if you’re age 50 or older) as an employee, plus you can add up to 25% of your earnings as an employer contribution for a total combined contribution of up to $58,000 per year (or $64,500 if you’re age 50 or older) in 2021. For a traditional IRA, you can contribute up to $6,000 per year (or $7,000 if you’re age 50 or older), and for a SEP IRA, you can contribute up to 25% of your compensation (to a max of $58,000) in 2021. 

2. Mileage Deduction

Did you ever have to drive your car for business purposes? While you can’t deduct your daily commute to your permanent work location, you may be able to deduct mileage costs if you have to travel for work, such as to a conference or to meet with a hospital or medical group. In order to deduct your expenses, you’ll have to keep records of the distance per trip and the date of travel. The simplest way to claim this deduction is to use the IRS’ standard mileage rate, which for 2021 is 56 cents per mile for business.

3. Education Credits

In 2021, will you complete your master’s, return to school to get your doctorate degree, or attend continuing education courses? If so, you may be eligible for education credits, which were created to help offset higher education costs for yourself or eligible dependents.

There are two primary education credits currently available. The first is the Lifetime Learning Credit. For this credit, up to $2,000 may be deducted for each eligible student for higher education expenses such as tuition and fees, books required to complete the courses, and relevant supplies and equipment. The full credit is eligible for couples married filing a joint return with a modified adjusted gross income of $118,000 or less. While many seasoned CRNAs may be over the income limit, newer CRNAs may be eligible for this credit.

There’s also the American Opportunity Credit. For this, up to $2,500 per eligible student may be deducted for up to four years of postsecondary education. Each eligible student must be pursuing an approved credential. Full credit is available to married couples filing a joint return with a modified adjusted gross income of $160,000 or less.

4. Business Equipment and Home Office Deduction

If you had to purchase equipment to do your job, from a computer to office supplies, scrubs and licensing fees, you can take a deduction for up to $500,000 of expenses. If at any time you have to work out of your home, whether to search for new freelancing opportunities or schedule appointments, you can also claim a home office deduction.

To qualify, the space will need to be solely used for business purposes, such as an office.  Your deduction will be based on the space of your home office, the total size of your home, and your total yearly costs.

5. Health Insurance Deduction

As a self-employed CRNA, you likely pay for your own health insurance premiums. If so, you can claim a deduction. However, this deduction is only available if you did not have the option to take advantage of an employer-sponsored plan. If you also pay the premiums for your spouse and dependents, you can deduct those expenses, as well.

The Tax Cycle

While no one looks forward to Uncle Sam’s visit each year, paying taxes and filing your return are annual necessities. By working with a qualified professional who understands CRNAs to plan a year-round tax minimization strategy,  file your taxes, and understand deductions you’re eligible for as a business owner, you can legally mitigate your tax bill and save more for retirement.

At CRNA Advisors®, we can help you evaluate your investments, financial plan and determine appropriate tax minimization strategies to help you save more of your hard earned money. To learn more, call our office at 855.304.3748 or email inquiry@crnafinancialplanning.com.

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About Jeremy Stanley

Jeremy Stanley, EA, CFP®, AIF®, is the founder of CRNA Advisors®, CRNA Financial Planning® and CRNA Tax Associates®. He has been providing advice and guidance for Certified Registered Nurse Anesthetists for over two decades. As a CERTIFIED FINANCIAL PLANNER™, Jeremy has met rigorous certification and professional standards set by the CFP® Board. He is committed to adhering to the principles of integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence when dealing with clients.

Jeremy is also the author of The Wealthy CRNA and A CRNA’s Life After Anesthesia. The Wealthy CRNA features insights into becoming a financially successful CRNA and how to start planning for your financial future, and has been prior approved for up to 4 Class A CE credits by the AANA. A CRNA’s Life After Anesthesia serves as your financial roadmap for a smooth emergence into retirement. It reviews recent changes in the CRNA industry along with the new rules of retirement and the final steps of legacy planning. This book has been prior approved by the AANA for up to 2 Class A CE credits.

Investment advice offered through Private Advisor Group, a registered investment advisor. 

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.