Tax Planning for High-Income Professionals in Maryland

High-income professionals in Maryland face some of the highest combined tax burdens in the country. Between federal rates, Maryland state income tax, and county piggyback taxes, a physician, attorney, or executive earning $500,000 or more can pay effective tax rates exceeding 45%. Without proactive planning, that burden only grows.

Christina Nortman, CPA is the Managing Partner of the Northeast Region at AE Tax Advisors. She specializes in building tax strategies for high-income professionals who have outgrown standard compliance-focused CPA relationships.

Entity Structuring for Professionals

Many high-income professionals operate as sole proprietors or single-member LLCs, leaving significant tax savings on the table. An S corporation election with proper reasonable compensation planning can reduce self-employment tax by $15,000 to $30,000 per year for a professional earning $400,000 or more.

For professionals whose income exceeds QBI deduction thresholds, Christina Nortman evaluates whether a C corporation election produces net savings through the flat 21% corporate rate, particularly when combined with retained earnings strategies and employer-sponsored benefit plans.

Maryland's pass-through entity (PTE) tax election adds another dimension. By electing to pay state tax at the entity level, high-income professionals can effectively deduct state taxes above the $10,000 federal SALT cap.

Retirement Plan Optimization

High-income professionals often underutilize retirement plan opportunities. Beyond basic 401(k) contributions, Christina Nortman evaluates:

• Defined benefit plans that allow annual contributions of $200,000 or more for professionals over age 40
• Cash balance plans that combine defined benefit and defined contribution features
• Backdoor Roth IRA strategies for professionals above direct contribution income limits
• Solo 401(k) plans with employer profit-sharing contributions for independent practitioners
• NQDC arrangements for employed executives looking to defer compensation beyond qualified plan limits

Real Estate Tax Planning for Professionals

Many Maryland professionals invest in real estate as part of their wealth-building strategy. Cost segregation studies, the short-term rental material participation strategy, and 1031 exchanges can produce significant tax savings when coordinated with a professional's primary income sources.

For physicians and attorneys who qualify as real estate professionals under IRC Section 469, rental losses can offset active professional income, producing substantial year-one tax reductions when combined with cost segregation.