Tax Rounds - July 2026 Newsletter

What’s new at TaxSmart MD?

The summer is my favorite time of year as a tax advisor, because it’s the best time to look forward and optimize for 2026 and future years!  I’m also happy to say that almost all of my clients have had a tax strategy meeting. 

In May, I finished a 600-mile bicycle trip through Central New York (more about the Empire State Trail). It’s a beautiful area with very rich history.  My favorite aspects of bicycle trips is that you can enjoy the outdoors from sunrise to sunset and set your own route and itinerary.  It’s also great for catching up on audio continuing education!

I’ve had a few clients receive notices from the IRS and state tax authorities.  My advice is to never take these at face value.  The IRS in particular is severely understaffed and sending a slew of confusing, nonsensical, and unclear notices.  If you are a current TaxSmart MD client, please be sure to upload any notices you receive to Tax Dome, and I’ll promptly explain them and let you know the best path forward.  It’s possible that something was missed while your tax return was prepared, but often they are much ado about nothing.

The other common notice that I’m seeing is requests for identity verification from the FTB in CA.  Unfortunately, if you get one of these, I think you just need to follow the letter’s instructions, which means sending a dossier of documents to Sacramento.  The commonality among clients who receive this notice is that they’ve gotten married in the past year, or they are filing separately for the first time.

What’s New in the Blog:

Note - I started adding trivia questions to the blog posts, which you can read, answer, and use to stump your friends and colleagues if you are interested!

After-Tax 401(k) Contributions Part I: Making the Most of Your Solo 401(k) Space: 

Most doctors with solo 401(k)’s max out their $24,500 (2026) employee contributions. If you can make the maximum total contribution of $72k between the employEE deferral and employER contributions, great!  But sometimes your business may not have enough net income to do this, or for one reason or another you’re better off paying tax now than down the road.  If so, making after-tax contributions may benefit you.

After-Tax 401(k) Contributions Part II: Pitfalls and Interactions with Other Retirement Plans:

First of all, I hope you click the link just to see the AI illustration - it’s one of my favorites!  This is the post that explains why making use of after-tax contributions in Solo 401(k)’s isn’t always a good idea.

Why Does My Tax Professional Charge So Much? A Physician’s Guide to Lowering Your Tax Prep Bill: 

One of the most common questions I get is “what does a good CPA cost?”  The frustrating answer is that “it depends.”  I wrote this post to explicate what “it” “depends on.”  While there is an undersupply of competent tax professionals, the good news is that there are reasonable steps within your control that can lower the price you pay.  Also, you’ll have a better experience if you hire someone before tax season.  There is no better time than the present to get started with a competent advisor, including myself!

If there are any tax topics you want me to visit in a future blog post, you can reply or email me at logan@taxsmartmd.com.  The purpose of the blog is to educate on topics that matter to YOU!

Other Media Appearances:

Estimated Tax Penalties Aren’t Always Final — Here’s How to Shrink Them:

This is my first article for White Coat Investor, and as you might expect, it is on the more technical side.  However, I am one of those people that likes to understand how complex systems work, and if you are the same way, you may find it interesting to learn how the IRS calculates certain penalties.  This particular tax form is almost indecipherable when you first look at it, but I do my best to try to help it make sense.

When Retirement Isn't the End of the Journey: Dr. Logan Foltz on Finding Fit after FIRE (Second Shift Podcast)
Apple Link

I think I’ve done five podcasts now, and this was probably the one I enjoyed the most (largely because we talked about life journeys and transitions more than taxes).  I hope it’s also an enjoyable listen!  If you’re ever wondering why someone would take a big pay cut to leave medicine, and the vicissitudes of pivoting to something completely different, you will likely find this discussion to be illuminating.

Outside News and Views:

They Want to Stop Paying Taxes as a Protest. There Are Consequences. (NY Times Gift):

As a tax advisor, I’ll of course never recommend you engage in unlawful tax evasion.  Philosophically, this would be a fun topic for a college dorm lounge debate, but as I’ve gotten older, I’ve learned to accept the world for the way it is rather than try to make it into what I think it should be.  When it comes to tax policy, you can’t stop the wave, but you can learn to surf.  This means you have no control over where the money goes, but if there are aspects you find objectionable, you can legally try to minimize your tax liability.

The Retirement Tax Break That Most People Overlook (WSJ Gift):

Good article on the underutilized “Rule of 55.”  However, if you’re between 55 and 59.5, before you get too excited about this, see if your plan offers it (plans are not required to include this feature).  This can be an effective loophole for getting other pre-tax money (from former jobs) taken out before 59.5.

California’s proposed billionaire tax: what you need to know (Guardian):

I don’t have any clients who will be impacted by this, and I’m not that sympathetic to billionaires.  I don’t have a crystal ball, but my suspicion is that if this passes, it will be a financial net negative, since it only takes a small percentage of billionaires leaving the state (permanently) to undo any benefit from a “one-time” tax.  The interesting aspects to me are whether more states or the federal government will try to impose taxes based on valuations of wealth or unrealized capital gains.

Marginal vs. Effective Tax Rates (WCI): 

I calculate marginal tax rate differently (read this blog post to see why my numbers are usually higher). But this is a good article that explains why the marginal tax rate doesn’t really tell you the total percentage of income that goes toward taxes.  My hot take is that the effective tax rate only really matters if you want to compare it with your friends and see whose number is lowest or highest.  The marginal tax rate is where you exercise agency.

Solo 401(k) vs. SEP-IRA for Physicians (2026): Which Wins for Your Income Level? (Physician on Fire):

A good article, but I don’t agree with all of it.  I think the only good reason to use a SEP IRA instead of a Solo 401(k) is if you have non-spouse employees.  Nevertheless, this is a good overview of why the Solo 401(k) usually wins out.  The Backdoor Roth/Pro Rata rule is most well-known but 401k’s in general have more favorable options, such as employEE contributions and catch-up contributions.

Wait, you can deduct this??

Swimming Pools!

Before you get too excited, this deduction was allowed as a medical expense because it was recommended by the taxpayer’s physician to slow the spread of severe osteoarthritis.  Moreover, there were no other adequate facilities within a reasonable distance for the taxpayer.

Also, the pool was specially designed and not suitable for general recreational purposes.  So, think twice before installing that swim-up bar and water slide.

That’s it for July.  I hope you have a wonderful summer, and stay tuned for the next newsletter in October!