CRNA Financial Planning: Tax Strategies to Build Long-Term Wealth
As a Certified Registered Nurse Anesthetist (CRNA), you have the potential to earn a high income, especially if you work as a 1099 independent contractor. However, high earnings can also come with high tax liabilities if you do not have the right financial strategies in place. Proper financial planning, especially tax planning, is crucial for building long-term wealth and ensuring that you keep more of what you earn.
This guide will walk you through the best tax strategies CRNAs can use to grow their wealth, minimize tax burdens, and secure their financial future.
1. Understand Your Tax Obligations as a CRNA
CRNAs who work as W-2 employees have taxes automatically withheld from their paychecks, but 1099 independent contractors are responsible for managing their own tax payments. This includes:
Self-Employment Tax – A 1099 CRNA must pay the full 15.3 percent self-employment tax, which includes Social Security and Medicare taxes.
Federal and State Income Taxes – Unlike W-2 employees, independent contractors must set aside money for income taxes and make estimated tax payments throughout the year.
Quarterly Tax Payments – The IRS requires 1099 CRNAs to pay taxes quarterly instead of waiting until the end of the year.
If you do not properly plan for taxes, you could end up with an unexpected bill and penalties. Setting aside at least 25 to 30 percent of your earnings for taxes ensures that you are prepared.
2. Maximize Tax Deductions to Lower Your Taxable Income
One of the biggest benefits of being a 1099 CRNA is the ability to deduct business-related expenses, reducing your taxable income and overall tax burden. Some of the most common deductions include:
Work-Related Travel – Mileage, airfare, lodging, and meals while traveling for work.
Professional Fees – Licensing fees, malpractice insurance, and membership dues for professional organizations.
Continuing Education – Courses, certifications, conferences, and medical journals needed for professional development.
Technology and Equipment – Laptops, scheduling software, and medical tools used for work.
Home Office Deduction – If you use a portion of your home exclusively for administrative work, you may qualify for a home office deduction.
Tracking these expenses throughout the year ensures that you claim all eligible deductions and maximize your tax savings.
3. Leverage an S-Corp to Reduce Self-Employment Taxes
If you earn a substantial income as a 1099 CRNA, forming an S-Corporation (S-Corp) can save you thousands of dollars each year in taxes.
As a sole proprietor, all of your income is subject to self-employment tax. However, if you establish an S-Corp:
You pay yourself a reasonable salary, which is subject to self-employment tax.
The rest of your income is taken as distributions, which are not subject to self-employment tax.
For example, if you earn $200,000 per year:
As a sole proprietor, you would owe self-employment tax on the full amount.
As an S-Corp, you could pay yourself a $100,000 salary and take the remaining $100,000 as distributions, saving over $15,000 in self-employment taxes.
A tax professional can help you determine if an S-Corp is right for your situation and assist with setup and payroll compliance.
4. Invest in Tax-Advantaged Retirement Accounts
CRNAs should take full advantage of tax-advantaged retirement accounts, which allow you to reduce your taxable income while building long-term wealth. The best options include:
Solo 401(k) – Allows high annual contributions, up to $66,000 in 2023, reducing taxable income.
SEP IRA – Allows you to contribute up to 25 percent of your net earnings, with a cap of $66,000 per year.
Traditional IRA – Contributions are tax-deductible, though income limits apply.
Roth IRA – Contributions are not deductible, but earnings grow tax-free for retirement.
Maximizing contributions to these accounts lowers your taxable income now while ensuring financial security in retirement.
5. Use a Health Savings Account (HSA) for Additional Tax Savings
If you have a high-deductible health plan, an HSA is another excellent way to reduce taxes while covering medical expenses.
Contributions to an HSA are tax-deductible.
The money grows tax-free.
Withdrawals for qualified medical expenses are tax-free.
For 2023, the contribution limits are $3,850 for individuals and $7,750 for families.
6. Plan for Quarterly Estimated Tax Payments
To avoid penalties and interest charges from the IRS, CRNAs working as independent contractors must pay estimated taxes four times per year. The due dates are:
April 15
June 15
September 15
January 15 of the following year
Working with an accountant to calculate your estimated payments ensures you are not underpaying or overpaying.
7. Work with a CPA Who Specializes in CRNA Tax Planning
A CPA who understands the specific financial and tax challenges of CRNAs can help you:
Maximize your deductions.
Set up an S-Corp for tax savings.
Ensure compliance with IRS regulations.
Plan long-term tax strategies to grow wealth.
While hiring a tax professional comes with an upfront cost, the amount they can save you in taxes and financial planning is often significantly higher than their fees.
Conclusion
CRNAs have incredible earning potential, but without proper financial planning, a significant portion of that income could be lost to taxes. By implementing tax-efficient strategies, such as maximizing deductions, forming an S-Corp, contributing to retirement accounts, and working with a tax professional, you can significantly reduce your tax burden and build long-term wealth.
At Commission Based Financial Consulting (CBFC), we specialize in helping CRNAs with tax planning, business structuring, and long-term financial strategies. On average, our clients save $18,000 in their first year with us.
If you are ready to optimize your tax strategy and keep more of your hard-earned income, contact us today for a personalized financial plan.
