5 Actionable Tax Strategies For Dental Professionals

To reduce your tax bill as a dental professional, strengthen your savings for retirement, and set your practice up for success in the long-term, having a robust tax strategy in place is a must. But it isn’t enough to simply react to your taxes in April, proactive planning that takes place before the 31^st of December, could save you thousands of dollars in taxes.

Here are 5 actionable tax strategies that with help from experts in tax planning for dentists, could set you and your dental practice up for long-term success:

1. Leveraging Section 179 and bonus depreciation deductions

With 100% bonus depreciation restored this year, and higher deduction limits for Section 179, dental professionals can now fully write-off big ticket purchase costs – such as digital impression scanners and CBCT scanners – in the year that they’re purchased, instead of having to spread them out over time. 

If you plan to make some upgrades to your practice, getting them done before the 31^st of December can help you immediately capture tax savings. Just be sure to weight up the deduction against your financing and cashflow needs. 

2. Maximizing retirement contributions

With contribution limits for this year increased, dentists can protect more of their income from taxes while building up their wealth for the long-term. Maxing out these 3 retirement plans before the end of the year is a simple and highly effective way to lower your tax bill and protect your wealth for the future:

• 401(k) – you can reduce your taxable income while investing in your retirement, thanks to higher annual deferrals
• Profit-sharing or SEP IRA – want bigger deductions as a dentist? These retirement plans are ideal for that
• Defined benefit plans – if you’re a high-earning dentist or oral surgeon, this plan is particularly valuable as it allows you to contribute more, as well as deduct more

3. Reviewing the structure of your practice 

It may pay to review the business structure you’ve chosen for your dental practice, as even the smallest of changes in its’ organization can result in significant tax savings every year. Talk to a dental accountant about whether you should be operating as a sole proprietor, S-Corp or multi-entity, to reduce your taxes and gain access to more deductions. 

4. Taking advantage of tax credits for staff benefits

While every dental practice owner knows that offering benefits to employees can improve retention rates, they might not know that it can also help them reduce their taxes. With an accountant’s guidance, check whether you may be eligible for credits for such benefits as childcare assistance, health insurance coverage, or continuing education. Capable of directly lowering your taxes, a benefit program that qualifies could boost employee morale, while offsetting thousands of dollars for your practice.  

5. Planning for a future exit or transition

Retirement might feel like a long way in the future for you as a dental professional, but it’s really never too early to start planning for an eventual transition. Without a tax strategy in place when you do come to sell your practice, or pass it on, the results from a tax perspective could be disastrous. 

With smart planning you can better manage your capital gains, instalment sales and dentist tax deductions.

If you want to position yourself and your practice for long-term, sustainable financial health, taking action before the end of December is strongly recommended. Why not schedule a consultation with a dental tax expert today, and review the 5 strategies outlined above to put you in better control of your tax outcome, and your finances in general.