How to maximize tax savings as an NP, PA, or CRNA locum in 2026

In a recent webinar, Cerebral Tax Advisors founder Alexis Gallati shared how CRNA, NP, and PA locums can maximize their tax savings in the upcoming year. Specializing in tax strategies for medical professionals, Alexis provides valuable insights into proactive tax planning, optimizing employer benefits, and exploring investment opportunities with significant tax advantages. Whether you're new to locum tenens or looking to refine your financial approach, check out this webinar for key strategies to help you keep more of what you earn in 2026 and beyond.

Watch the full webinar:

Tax webinar highlights

Why tax planning matters

Tax planning isn’t just about compliance. Without a plan, W-2 earners may overpay taxes or face underpayment penalties simply because they didn’t understand their options. Proactive planning enables individuals to anticipate their tax exposure, make informed financial decisions throughout the year, and avoid surprises at tax filing time.

Challenges unique to W-2 earners

Unlike business owners, W-2 earners have limited flexibility when it comes to taxes. Income timing is set by employers, deductions are restricted, and many common tax-saving strategies are simply unavailable. Understanding these constraints is essential to focus efforts on strategies that actually work within the W-2 framework.

Core strategies to reduce taxes

NPs, PAs, and CRNAs should focus on these strategies to reduce their tax burden:

• Maximizing retirement plan contributions during high-income years

• Using HSAs for both tax savings and long-term growth

• Leveraging backdoor Roth IRAs for tax-free retirement income

• Coordinating spousal contributions when applicable

Deductions available to W-2 earners

Although deductions are more limited for W-2 employees, Alexis reviews several opportunities that may still apply. Itemized deductions such as mortgage interest, state and local taxes, property taxes, and charitable contributions can provide meaningful savings for some households.

Investment strategies with tax benefits

Certain investments can create tax advantages even for W-2 earners. Real estate investment is discussed in depth, including:

• Passive vs. active income classification

• Real Estate Professional Status and its limitations

• Short-term rental rules that may allow losses to offset W-2 income

Oil and gas as a tax-advantaged investment

Oil and gas investments are another potential tax-saving option for high-income earners. These strategies can significantly reduce taxable income in the year of investment but require careful evaluation and a long-term outlook.

To learn more about working locum tenens, view today's job opportunities below or give us a call at 954.343.3050.

W‑2 vs 1099: Which path fits your situation?

Read the full transcript of the webinar below:

My name is Alexis Gallati and I am here to discuss with you maximizing tax savings for W2 earners, specifically you medical professionals. And I'm excited to discuss with you the different types of tax savings that a just a W2 earner can have. Because I'm sure you guys are like, I'm not sure what to do. So let's get into it. Before we start, I would love to introduce myself.

I again, I am Alexis Gallati. I am the founder and lead tax strategist at Cerebral Tax Advisors. And I have been in the tax industry for over 20 years. I'm married to a physician. I grew up in a physician household as well. So I am living and breathing what you guys are going through. I have my MBA, my master's in tax, I'm an enrolled agent, a certified tax strategist, and I did a three year fellowship in IRS representation. Because yes, it is important to obviously save tax, but it's more important to back up that tax with what the IRS wants in documentation, etc. So I really, I started Cerebral in 2014 because my husband and I were starting his career as an Attending and I saw the writing on the wall when it came to tax taxes and what was coming down the road for us, for, you know, that higher tax bracket. And I had spent 12 to 13 years working for local regional CPA firms and I knew that there was a much better way to save more of what we were earning.

So when I started cerebral, we are 100% virtual. We have clients in over almost every single state in the US and we specialize in medical professionals, business owners and real estate professionals. We really start with that proactive planning. But we are doing your tax preparation, your bookkeeping, CFO services, business services, IRS and state audit representation, everything, business planning, etc. And we are really focused on white glove service and communication. Both are a top priority for us. And we on average see our clients receive over 453% return on investment with our tax planning strategies. So I don't want to gatekeep this information for you. So let's get started.

Why tax planning matters

Now let's go and talk about what we're discussing today. We are going to talk about why even bother with tax planning? What is it? Why should you be doing it? We're going to talk about maximizing employer benefits and maximizing retirement contributions, two ways to really help lower your taxable liability as a W2 earner. I'm also going to discuss the backdoor Roth IRA strategy. This is an area of much confusion. A lot of people just don't understand that they even have this option. So we're going to talk through it. Also, let's talk about what you can actually deduct as a W2 earner and what investments there are out there that a W2 earner can invest in that do have tax benefits.

So why tax planning? Of course, it's to reduce your tax liability. Obviously, if you are planning ahead, you are going to be saving you tax because tax planning guarantees tax savings. And what it also does is it improves your cash flow. Now that you're not paying a lot more money to the IRS, you're able to use that money for other things like paying down debt or purchasing a home, going on vacations, or even just saving in general.

It also enhances your financial planning because it gives you a clear picture for your financial situation, for informed investments, spending and savings decisions. And it also helps you to avoid penalties. The IRS requires that you pay your tax as you earn it. And so that's being taken out for you as a W2 employee. But if you have too little taken out, you can actually be subject to underpayment penalties. And we obviously want to avoid that. You don't want to be penalized. So this will. By planning, you're able to determine what your liability is going to be and you're able to make sure you pay the correct amount on time. It also goes and gives you peace of mind. It reduces stress and it provides financial security. Nobody likes surprises. Nobody wants to owe the IRS or your state a large amount of money a few days before the deadline and you're having to scramble. So being proactive in your planning really helps to give you that again, that peace of mind and lower your stress.

Challenges unique to W-2 earners

Now, W2 earners definitely get the short end of the stick when it comes to the tax code. The tax code is really built for those that have other investments or own businesses. If you have 1099 income, it really allows you to open up the door and, you know, hire your kids, write off, you know, your home office, write off parts of your vehicle, et cetera. And if you own real estate, it allows you to go and write off part of that investment. You know, write off the, you know, allow you to have an appreciating asset, et cetera. So when you're W2, there's just a lot less available to you when it comes to tax strategies.

You have limited deductions, so there's no opportunity again for those business deductions. And you really can maybe look at standard deduction versus itemized deductions on your Schedule A on your personal tax return. For those that might not realize that itemized deductions are things like your mortgage interest, your real estate taxes or charitable deductions, there's also a lack of control over income timing. When for example you have a business, you can either accelerate income into your current year or you can push it off into the next year. A lot of W2 employers don't allow you to strategically time your income. Whether it's for a year end bonus or RVUs, they'll stick it all in, you know, the current year. Or sometimes they say hey, you actually don't get your fourth quarter bonus until the first quarter of the next year.

Core strategies to reduce taxes

So what can you do about it? What are some items that strategies you can be doing in order to save tax? Well, first off, if you have an employer that has a retirement plan, that's the very first thing you should be looking at is maximizing those benefits. If your employer offers a 401k, 403b or similar plan, contribute as much as possible, ideally up to the annual limit in 2026. The contribution limit for these plans is $24,500 with an additional $8,000 catch up if you're over the age of 50. So make sure that you are maxing out your retirement and also take full advantage of your employer matching. This is essentially free money, so contribute at least enough to receive the maximum match. You'll have to go and consult with your HR department and look at your benefits documents to find out what that max is. But a minimum you should be doing that because otherwise you're just leaving money on the table.

And ultimately these contributions, if they are pre-tax contributions, reduce your taxable income which thus decreases your current tax liability. Some employer plans will allow for Roth contributions, but you, you know, if you want to be able to reduce your tax liability, you'll need to make sure that those are pre-tax contributions. And you'll want to understand what time frame of your of your career you're in. Obviously if you are just a resident then you'll want to probably go that Roth route because you're not making as much money and you're much lower tax bracket where if you're in your highest earning years, it's going to make more sense for you to put that money into a pre-tax IRA so you get that deduction and you can use that that tax savings towards other investments and to hopefully get a better return on investment overall of your money.

Health Savings Accounts

Other employer benefits you should consider are a health savings account. So if you are eligible, the health savings account is triple tax advantaged, which means that it grows tax free. Excuse me, you contribute tax free, it grows tax free and it comes out tax free when you use it for qualified medical expenses. It's a wonderful tool. I highly recommend it if you have a high deductible plan. So if you are an individual or family and you have coverage under a qualifying high deductible plan, not less than $1,700 for, so that the deductible is not less than $1,700 for individual, $3,400 for families. You can contribute up to $4,400 as an individual or $8,750 for family into your HSA per year. And the maximum out of pocket is capped though at $8,500 for an individual and $17,000 for a family.

So as long as you have this requirement then, and you have that high deductible plan, then you can go and contribute to an HSA. Sometimes it's through your employer, your employer will actually have that HSA. If they don't, then even if you have a high deductible plan, you can go out to places like Fidelity or Optimum bank or HSA bank and set up an account on your own. It doesn't have to actually be an employer HSA plan as long as you have that high deductible plan. Now the major benefit of this is yes, you get a little tax deduction in the year, looking at about an $8,750, if you're a family and you have about an $8,750 contribution into your HSA, it may save you somewhere between $1,500-$2,500 a year depending upon your bracket. The biggest opportunity is you're able to put that money into your HSA and instead of using it for qualified medical expenses right now, when you're younger and you're healthier, you just pay those medical expenses out of pocket and then you save those receipts.

And about 30 years from now, when you actually want to use that HSA money, you're able to submit those claims later on and then get the money out when you actually need it. This gives you the opportunity to allow that HSA money to grow. Most of the HSA accounts allow you to actually invest those funds into the stock market. So you can put that into like an index fund or an ETF and just let that grow year after year after year. And when you're older and supposedly will have more medical conditions, then you're able to submit those old receipts and get use of that money at a more optimum time.

Now, of course, if you have a medical emergency, by all means, use the HSA money. That's what it's there for. But if you can afford to pay those qualified medical expenses out of pocket, that's where you really want to, you know, take advantage of the time value of money and letting that grow.

Backdoor Roth IRA

Let's talk about the backdoor Roth. Many of you, I'm sure, have heard of this strategy, but you might not be using it in your everyday life and in your tax planning. Now, when you are a W2 employer or even really just anybody that has earned income, you are allowed to contribute money into your backdoor Roth IRA and just your IRA in general. However, most physicians make too much money to actually do a direct Roth contribution. So what ends up happening is you're able to put after tax dollars into your pre-tax IRA and then roll over those funds to your Roth IRA.

And this allows you to get money into your Roth IRA without having, you know, to worry about those income limits. So contributions to a pre-tax IRA as you remember are deductible. But contributions to a Roth IRA are not deductible. They're made with post tax dollars. In 2026, the contribution limit is $7,500 for each, the taxpayer and the spouse. If you are married, even if your spouse does not have earned income, let's say that they're a stay at home parent. Just because since you are earning have earned income, they have earned income by default. So you can each be putting away $7,500. This results in tax free growth. Since you're putting that money into a Roth IRA that there it's post tax dollars going in, it grows tax free and then it comes out tax free at retirement time.

Unlike a pre-tax IRA where you're getting a deduction when you put it in that grows tax free and then you have to pay tax when it comes out, when you take it out for retirement. So Roth IRAs are wonderful to consider. Just like we talked about before with your employer plan, if you have a Roth 401k plan, then you can contribute to that if it makes most sense. Especially like I said, if you're like if you're a resident in a lower tax year or you, you know, have retired early and you're not quite taking those required minimum distributions. Now with the Roth IRA distributions from your Roth IRA as I mentioned, are tax free after five years of opening. So if you're going to open one this year, then you have to wait five years before you can even take any money out. And if you do take money out before age 59 and a half or before that five year rule, then any withdrawals that you take may be subject to taxes and 10% penalty unless an exception applies.

Now the rules for high income earners are that if you earn over $168,000 as a single or $252,000 in 2026 as married, then you will not be eligible to do that direct Roth IRA contribution. So and then starting in 2026, for those that are over 50 with a prior year wages over $145,000, you have to make catch up contributions to a Roth 401k if their plan allows. If it's not allowed, then no catch up is allowed. So that's a brand new rule that that passed with the one big beautiful bill. And so just be aware of that. If you are over 50 now as I mentioned before, if you want to do a backdoor Roth and you are over this $168,000 single, $252,000 married, then you are not able to do a direct Roth. So let's talk about how to do the backdoor Roth. Now first off, you need to make sure that you do not have any balances as of the end of the year in your pre-tax IRAs.

And that's to avoid what's called pro rata rules. Now when the IRS looks at all your IRAs, so this includes traditional IRAs, SEP IRAs, simple IRAs, rollover IRAs, all of those pre-tax IRAs, the IRS cannot distinguish whether the funds in those accounts are pre-tax or post tax. So what you need to end up doing is removing all the pre-tax amounts and then you're able to contribute post tax dollars into that traditional IRA to then do your backdoor Roth. Now if you don't have a 401k 403b that will allow you to roll over those funds from your pre-tax IRA into the 401k then unfortunately you're a little out of luck. The 401ks, 403bs, those employer type plans are not subject to these pro rata rules.

So what you need to do is, you know, get with your HR department, the benefits department, and see if you are allowed to roll over any pre-tax monies from your traditional IRAs into or your you know any of your pre-tax IRAs into your employer's plans. If you, if like I said, if they don't allow it, then you know, you would need to find some other way like maybe going out and doing a weekend of locum work or getting some sort of surveys or expert witness or some other 1099 income where you can then set up a 401k, your own 401k solo 401k as a business and then move that money over. So with the, that backdoor Roth, once you do have a zero balance in your pre-tax IRAs, then there's absolutely no question to the IRS that the money that $7,500 that you're putting in, into your, your pre-tax IRA is being funded with post tax dollars.

Now remember, since you're making too much money, if you put that $7,500 into your traditional IRA, you're not getting any deduction for that contribution because again, you make too much money. So those dollars are post tax. You've already paid tax on them. You're putting that $7,500 in. You want to make sure that you have a Roth IRA account open before you do this. And so you put that money in, you then immediately, once it clears, you want to immediately roll it over or convert it over to your Roth IRA. Since you've already paid tax on that money, there's no additional tax that will be due. It'll just roll it over and then you will, you know, into your Roth IRA and it's done. That's, that's how you do it. It's really quite simple. As long as you have that open pre-tax IRA and you have your Roth IRA and you just put the money in, roll it over and you're, and that's it. You just don't want, you want to make sure that you don't have the, the funds in the pre-tax IRA in there too long because if there's any growth, then that growth will be taxable when you move it over to the Roth IRA.

So if you put in $7,500 and it grows to $7,600, then that hundred dollars of growth will be taxable when you roll it over. So do it immediately as possible. You'll usually earn like a few cents, but that's okay, that's not a big deal. It's, that's not going to cost you anything. So this is the basics of the backdoor Roth IRA. And you know, just make sure that you don't have any of those pre-tax IRA balances beforehand to avoid those pro rata rules.

Deductions available to W-2 earners

Okay, great. So let's discuss what you can actually be deducting. Now of course, as a W2 employee, you have the option of doing lots of itemized deductions. And those main ones are state and local taxes that you've paid to your states, property taxes, the mortgage interest and charitable deductions. And there's actually quite a few different options that you can be looking at. One is a donor advised fund. And so if you have a large amount of appreciated stock, this really allows you to, you know, let's say that you have, you know, a hundred thousand dollars of appreciated stock of Coca Cola and you want to donate that to charity. Well, you definitely don't want to sell that and then give it to charity. You want to move because you have to pay capital gains tax on that. But what you can do is move that stock to a donor advised fund.

You'll get a deduction for that contribution to that donor advised fund. And then when you go to sell that stock in the donor advised fund, you're avoiding capital gains tax on that contribution. And so that contribution essentially did two things for you. One, you get a deduction for the contribution in there and you're avoiding capital gains tax as well. And so once you sell that, you don't have to pay capital gains tax if it's in the donor advised fund. And then you use those funds to give to charity. So you know, I've had lots of clients who have this appreciated stock and especially when they're getting towards retirement age and they don't want to worry about, you know, using their, their retirement funds to continue giving to charity, they will put this appreciated stock into their donor advised fund, let that grow, and then they use those funds for their charitable giving. And as I mentioned before, it's immediate tax deduction on the fair market value of the gift and avoids capital gains on the appreciated stock. Just know that your donation is limited to 30% of your adjusted gross income. So you can, you can contribute up to 30% of your adjusted gross income in these, in the donating of appreciated stock.

Now the other, if you don't have appreciated stock and you are still like to give to charity, but you're not hitting above the standard deduction amount when it comes to your itemized deductions, you might want to consider bunching your donations. And so what that means is going in, doing the giving every other year and bunching your donations at the end of the year. So if you are going to donate for 2026 and you know, you know you're going to donate in 2027, you might want to accelerate that donation from 2027 into 2026. So then you have a larger 2026 donation and you're able to do itemized deductions as opposed to the standard deduction.

Investment strategies with tax benefits

So let's get into investments with tax benefits. These are different types of investments that W2 earners can start doing without having to actually start their own business. The first one I want to talk about is real estate. Now I'm sure some of you might think, oh my gosh, Alexis, yes, real estate is another business and it definitely can be. There are different options available when it comes to how much you have to materially participate in order to get a benefit from real estate.

First, I want to go through the passive loss rules. Now the IRS automatically defaults real estate investing as a passive investment. So your W2 earnings are considered active earnings where real estate is considered passive earnings. And if you actually have any losses from a real estate investment or any passive investment in that matter, like if you are an owner in a surgery center, for example, and you're not actively participating in the day to day management, that's considered a passive investment. So if you have this passive losses coming from these investments, those losses you're not allowed to use against your active income unless you have passive income to put against it or you sell that investment.

So any losses that you have in the current year, you don't lose them, but they do get carried forward again until you have passive income to put against those losses or you sell that investment. So a lot of physicians will be, you know, sold real estate syndications, and this is where you buy into a partnership that owns a building or they're going to be building a building and then you get a return on your investment. You're considered a limited partner, which means you're the money. You're not running the day to day operations of that business. You are just the investor.

And any losses that occur will be carried over to the next year until that investment is sold or they create passive income. So this is very much a, you know, just give them the money and you don't need to really do anything with it. You are not materially participating in that business. Now if you own real estate directly, then you can either be a passive investor where you're just receiving that income, or you can be actively participating in it now with long term investments and same thing to long term properties or even short term properties. If you want to change the character of those losses from being passive to active, then you need to either participate in or qualify, excuse me, for that real estate professional status or the short term rental loophole or short term rental exception.

So let's talk about real estate professional status first. So when you own a long term rental, you cannot again take those any losses against your W2 income because of those passive loss rules. However, if you qualify as a real estate professional in the eyes of the IRS, then you are able to recharacterize those losses from being passive to active. So in order to be considered a real estate professional, IRS does not mean you have to go out and get your real estate license, although it helps. But you just need to invest in general spend at least or spend more than 50% of your working hours in a real estate activity. You also need to spend a minimum of 750 hours a year doing real estate activities. And this changes the activity from being passive to active. So you can take the losses in the current year and to be taking advantage of strategies like cost segregation studies which accelerate the depreciation into those first few years of property ownership. Now, when you're a full time physician, it's improbable that you will be able to qualify as a real estate professional because you're spending more than 50% of your time doing your work as a physician. However, if you have a spouse that is a stay at home parent, or maybe they just work part time, they could potentially qualify if they meet those requirements.

So that might be something to take a look at. And you have to convince your spouse that this will be a worthwhile strategy for you to help lower your taxable liability. The other option that has a much lower hurdle than real estate professional status is the short term rental loophole. Now this is where you have a short term rental. Think like an Airbnb where you have to be the one that spends the most time on that property, which means you can't have a property manager and you have to spend a minimum of 100 hours per year on that property.

And so this is much more attainable. You're able to make sure that you know, you, you know, you're the one that is approving the tenants and you are helping with the cleaning, you're dealing with repairs and maintenance, but you are also, if you're able to do this, then you're able to go and change that activity again from being passive to active. Now you just have to make sure that for your rental property that the average stay is seven days or less. If it's more than that, then it'll be considered either a medium rental property or a long term rental property. And then you start getting into having to do the real estate professional status.

Now I want to emphasize that when it comes to real estate, especially when it comes to the short term rental, make sure that you're purchasing real estate not just for the tax benefits. You know, don't let the tax tail wag the dog. You want to understand that you or purchase a property that will have great cash flow and also appreciation value. Really real estate, direct real estate owning is a whole second job. It really is. And you need to just be prepared to spend your time between both your main profession and then doing your real estate and that you keep really great records as well. So. But it's a wonderful option if you want to go into that real estate investing.

Oil and gas as a tax-advantaged investment

Another great investment to consider is oil and gas. And there are actually three different types of oil and gas investing that have tax benefits.

One is in general, one is mineral rights. And this is probably the most easiest, passive and what this is where you are getting royalties for those mineral rights. And if you receive $100 in royalties, you only pay tax on $85 of that. So you get a 15% depletion allowance. You don't have to pay tax on 100% of it. The next one is drilling funds. And this is where you invest in a partnership. That is where you get a tax deduction in that first year. We'll talk a little bit more about that second. And then there's also direct ownership. And that's where you actually directly own an oil rig as opposed to doing it through a partnership. So for those two options in year one, you generally get a deduction equal to about 75 to 90% of your investment. Now with the one big beautiful act, some of those investments are actually going even up to 100%. So if you put $100,000 into an investment in this example, you're getting an $80,000, let's say loss on the partnership K1 that reduces your active income. So this is actually that loss that you're receiving in that first year can be used against your W2 income. This is where that real benefit is. So $100,000 investment into, let's say the drilling fund results in about $80,000 loss and that loss is used against your ordinary income. And this generally results in about $30,000 tax savings. Now between years two and five you're earning your $100,000 back and then between years five and 12 you are getting, there's generally historically a 70% appreciation on the investment. So if you're putting a hundred thousand dollars in over the life of the investment, it's about $100 to $200,000 you're getting back.

So it's a 2x return on your investment now over the life of that investment. So if it is, let's say a 10 to 12 years, it's approximately about a 7% annual return on investment. So this is not, you know, a huge return, but it's I always like to call a bit of a Hail Mary at the end of the year if you are just like, hey, there's nothing else I really can be doing. I want to diversify my investments. And so I want, I'm going to, you know, invest in this.

Now this is generally very conservative investment. The major risk is market risk when it comes to the price of oil. But you just have to remember that there's no guarantee of well performance and it's a long term investment and you may lose your entire investment. That's particularly true when it comes to the direct ownership. There's a much higher risk of that oil well being dry. And so if you put in a hundred thousand, then you're just essentially getting a hundred thousand dollar write off if it comes up dry. So, but nobody wants to do that. And it's also important to remember that this is a, if you want that first year deduction, you have to invest in a brand new partnership or brand new direct ownership every single year now doesn't mean you're putting it into the same project every single year. It means that you're putting it in a new project every single year. So if this year you want to do it, but next year you don't, then you don't have to put any money into that project.

And so this is just an extra option for W2 earners to diversify their portfolio and start learning. I highly, highly recommend that you get lots of education around these investments. Same thing too with real estate. And really make sure you understand what you're getting into and the risks as well as the benefits before you invest. So do your due diligence, do your homework.

I want to thank you all so much for being here with me and discussing. Thank you to Weatherby for having me. I really enjoy talking to you all about different types of tax savings. And if you do have questions, the information here is on my screen and please feel free to reach out and I hope that you found tons of value in this. And good luck to your 2026 tax year and look forward to talking to you in the future. Thank you.

This summary article was created with the assistance of AI technology.